As part of US tax planning for founders, employees, board
members, and other individual service providers who receive equity
that is subject to vesting in connection with their services,
Section 83(b) elections are frequently used to potentially reduce
future taxes on such equity. Because Section 83(b) elections can
significantly affect the timing of income recognition, tax
liabilities and deductions, and overall tax strategy, it is
important to understand how a Section 83(b) election works and how
the new IRS Form 15620 can be used to make the election.
Overview of a Section 83(b) Election
Section 83(b) of the Internal Revenue Code (IRC) allows
taxpayers to elect to include the value of certain unvested
property (e.g., shares of stock, LLC or partnership interests,
etc.)1 received in connection with the performance of
services in their gross income before the equity vests. The
election must be made within 30 days of the transfer of the equity
to the employee or
