Narrative. The 83(b) election is one of the highest-stakes tax filings in startup practice. Under IRC § 83, stock received in connection with services is generally taxable as the restrictions lapse (i.e., as the shares vest), and the amount includible is the fair market value minus the amount paid. That means if the company’s stock price climbs during the vesting period, the founder pays ordinary-income tax on the delta every year, on stock they can’t sell. An 83(b) election flips this by electing to include the spread in income at grant (when it’s typically zero or near-zero) and starting the long-term capital gains holding period immediately. The election must be filed with the IRS within 30 days of the stock transfer — this deadline is jurisdictional and cannot be extended. Big-law practice: (1) prepare and send the election the day stock is issued, (2) use certified mail with return receipt, (3) keep copies in the corporate records and the founder’s personal tax file, and (4) provide a copy to the company. As of the 2015 tax year the IRS no longer requires a copy to be attached to the founder’s Form 1040, but many practitioners still recommend it.

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SEND VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED

Department of the Treasury Internal Revenue Service [IRS SERVICE CENTER — use the address where the taxpayer files Form 1040]

Date: [DATE]

Re: Election Under Section 83(b) of the Internal Revenue Code

Dear Sir or Madam:

The undersigned taxpayer hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, and Treasury Regulation § 1.83-2, with respect to the property described below, and supplies the following information in accordance with such regulation:

1. Name, address, and taxpayer identification number of the taxpayer: – Name: [TAXPAYER NAME] – Address: [TAXPAYER ADDRESS] – Taxpayer Identification Number (SSN): [LAST 4 DIGITS — do not include full SSN in any copy shared electronically]

2. Taxable year for which the election is made: Calendar year [YEAR].

3. Description of property with respect to which the election is being made: [NUMBER] shares of common stock (the “Shares“) of [COMPANY NAME], Inc., a Delaware corporation (the “Company“), par value $[PAR] per share.

4. Date on which property was transferred: [DATE OF TRANSFER].

5. Nature of the restrictions to which the property is subject: The Shares are subject to a vesting schedule and to a right of the Company to repurchase the unvested Shares at the lesser of cost or fair market value upon termination of the taxpayer’s service to the Company, and to other transfer restrictions, as set forth in a Restricted Stock Purchase Agreement between the taxpayer and the Company dated [DATE].

6. Fair market value of the property at the time of transfer (determined without regard to any lapse restriction): $[FMV PER SHARE] per Share, for an aggregate fair market value of $[AGGREGATE FMV].

7. Amount paid for the property: $[PRICE PER SHARE] per Share, for an aggregate purchase price of $[AGGREGATE PRICE].

8. Amount to include in gross income: $[FMV − PRICE] (the excess, if any, of the fair market value of the Shares at the time of transfer over the amount paid for the Shares).

A copy of this election has been furnished to the Company, as the person for whom the services were performed. The undersigned is the person performing the services in connection with which the Shares were transferred.

Sincerely,

_________________________________ [TAXPAYER NAME]

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Filing checklist (delete before sending): – [ ] File within 30 days of the transfer date — no extensions – [ ] Send via certified mail, return receipt requested, to the IRS center where the taxpayer files Form 1040 – [ ] Keep the certified-mail receipt and green card with the corporate records – [ ] Provide a copy to the Company – [ ] Retain a copy with the taxpayer’s permanent tax records

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This form is provided for informational purposes only and does not constitute legal advice or create an attorney-client relationship. Every situation is different; consult qualified legal counsel before using or adapting this document. © Montague Law.