83(b) Election
An election to be taxed on restricted equity at grant instead of as it vests — filed within 30 days, usually while the value is still low.
Filing an 83(b) within 30 days of receiving restricted stock (common with early-stage equity or early-exercised options) lets you pay tax on the small value today rather than the potentially much larger value as it vests. It can start the capital-gains and QSBS clocks early — but if the equity becomes worthless, the tax you prepaid isn't refunded. The 30-day deadline is hard and unforgiving.
Taxing the acorn, not the tree
An 83(b) election tells the IRS to tax the value of restricted equity now, at grant, instead of as it vests. For founder stock or early restricted shares worth almost nothing at grant, that means recognizing a tiny amount of income today so that all future appreciation is taxed as capital gain — and it starts the capital-gains and QSBS holding clocks immediately.
The 30-day rule that bites
The election must be filed with the IRS within 30 days of the grant — there are no extensions, and a missed deadline is generally fatal. Skip it on stock that later appreciates, and each vesting tranche is taxed as ordinary income at its then-current value, which can be brutal if the company takes off before the shares vest.
How Formation handles it
Formation records grant dates and the equity behind each holding so an 83(b) window isn't something you discover after it's closed, and so the holding-period clocks the election starts are tracked from day one. The filing itself is yours to make with your advisor — Formation makes sure the clock is visible.
A worked example
You're granted 100,000 shares of restricted founder stock worth $0.001 each. File an 83(b) and you recognize $100 of income now; all future gain is capital gain and the clocks start today. Skip it, and if the shares are worth $5 each when they vest, you recognize $500,000 of ordinary income at vesting instead.
Frequently asked
When is the 83(b) deadline?
Within 30 days of the grant, with no extensions. The election is filed with the IRS; missing the window generally can't be fixed.
When does an 83(b) election make sense?
Typically when the equity's value at grant is very low and you expect it to appreciate — paying tax on a near-zero value now converts future appreciation to capital gain and starts the holding clocks. It's a bet that's worth discussing with your CPA.
In Formation
Equity-comp tax planning
See this in your own numbers.
Formation organizes your whole household by entity and cites every figure to its source — the context that makes terms like this actionable.
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