83(b) Election
Also: 83(b), 83b election, section 83(b) election
A tax election to recognize income on restricted property at grant rather than at vest. Filed with the IRS within 30 days of the property transfer.
An 83(b) election tells the IRS to treat restricted property as taxable at the transfer date, based on current FMV minus anything paid, rather than at each later vesting date. The election is due within 30 days of the transfer, cannot be extended, and must be filed by paper mail with the service center that processes the taxpayer’s return. Keep a copy with the filed return.
Example: a founder receives 4,000,000 founder shares at $0.0001 per share, FMV equal to the purchase price. An 83(b) election produces $0 income at grant. All appreciation from that point forward is capital gain, and the long-term holding clock starts immediately. Without the election, each monthly vesting tranche would be ordinary income equal to the FMV at vest.
Common mistake: filing 83(b) on RSUs. RSUs are contract rights, not restricted property, and do not support an 83(b) election. Only restricted stock, early-exercised options, and certain profits interests qualify.
The election matters most at founder formation, on early-exercised ISOs and NSOs, and when joining a pre-seed company where FMV is still near zero.