Recommend Our Site to Your Friends!

Print This Page

Subject:   83(b) question
Date:   Mon, 7 Aug 2000
From:   Darin

Just visited your site. I found it to be very informative and helpful, especially the stock option information. I have a quick question for you, if you don't mind. I have a few thousand non-qualified stock options that vest over a four year period. I have not vested in any of the stock yet. In order to make the 83(b) election, must I literally exercise the options and pay the company the exercise price? Or may I just make the election, and then pay for the options later, perhaps as they vest? Any info would be greatly appreciated. Thanks

Darin

Answer

Date:   09 Aug 2000

Hello Darin,

In most cases, you must exercise the option and receive the stock before you can make a Section 83(b) election with respect to the transaction.

For example, many companies are allowing an early exercise where non-vested stock is received, such as shortly before an initial public offering. A Section 83(b) election would be appropriate for this scenario.

I hope this helps.

Good luck!

Mike Gray

For more information about non-qualified stock options, request our free report, Non-Qualified Stock Options - Executive Tax and Financial Planning Strategies.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.