The Section 83b election is a provision under the Internal
Revenue Code (IRC) that gives an employee, or startup founder, the
option to pay taxes on the total fair market value
of restricted stock at the time of granting. Restricted
stock include include stocks that are subject to a vesting period
that may last several years, on the condition that the employee
will continue working at the company for a number of years or until
a particular company milestone is met.
Section 83b election applies to equity that is subject to
vesting, and it alerts the Internal Revenue Service (IRS)
to tax the elector for the ownership at the time of granting,
rather than at the time of stock vesting. Making a Section 83b
election is based on the premise that the equity will be of a
higher valuation at a future date and allows holders to that
pre-pay tax liability on a low valuation. The fair
market value of the equity at the time of the granting or
transfer is the basis for the
