

What is an 83(b) election? (2008) - elmar
http://www.startupcompanylawyer.com/2008/02/15/what-is-an-83b-election/

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ChuckMcM
As we enter "bubble 2" it is important to also note a problem with 83(b)
elections.

So if you are hired by a company which gives you a restricted stock grant they
may also give you the option to use an 83(b) election to recognize all of that
revenue all at once. That lets you get the taxes out of the way and as it
vests you just get the stock (no additional tax to pay).

The argument is that the value of the stock is going up, so this will save you
future taxes (you get taxed at the fair market value when it vests). The
challenge is when it goes down.

If you elect and it goes down, you don't instantly get a "tax refund" of the
difference in value between then and now, instead you can write off the
difference against other long term gains (if you have them). If you don't have
them, you get to write it off, up to $3000 per year (not even a single
dependent!) until you've used it all up.

I know this because I was writing off just such a devaluation from stock
received pre-crash of 2000, and unlocked post crash of 2000. I didn't use up
the entire write off until 2006 when selling some stock with long term gains
from my then employer.

I say this not to scare you, but to share with you that part of the
"entrepreneurial" experience is that you get to visit almost _every_ part of
the IRS tax code in some detail, and rarely is it written to make it "easy"
for you. Cultivate a relationship with a solid accountant/CPA/tax lawyer
before you get to the point of going crazy trying to figure out all this
stuff.

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caniszczyk
Here's a much better post on this topic from the folks at Wealthfront:
[https://blog.wealthfront.com/always-file-
your-83b/](https://blog.wealthfront.com/always-file-your-83b/)

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eli
Also this is just generally a good example of why you need a good startup
lawyer help you with your documents. Sometimes you can cut corners and make
mistakes early in a startup and just fix them later. Failing to make the
proper 83b election would be very difficult to fix later.

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ekanes
This is so absolutely critical, and probably the SINGLE highest-leverage thing
you'll ever do if your startup is successful. Please if you're starting a
company, you must do this.

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x13
FWIW, here's the address to use

IRS FRESNO CA 93888-0002

(that zip4 is important) run this by a pro, it's too important to mess up.

~~~
bretthoerner
Some of us don't live in CA... :)

[http://www.irs.gov/uac/Where-To-File-Addresses-for-Tax-
Profe...](http://www.irs.gov/uac/Where-To-File-Addresses-for-Tax-
Professionals)

~~~
taylorwc
Your link is a good resource, since not all forms should go to Fresno, but
that office is more than just California. For instance, in Kansas and
Missouri, 83(b) elections are sent to the Fresno office. The receiving offices
are organized by regions.

