Does an employee (who received RSU's) file section 83(b) or the company that granted them?

Asked over 2 years ago - Needham, MA

I was granted some stock units in May 2011 by my company. The 1st installment vested in March 2012, with almost 40 % stocks withheld as taxes paid on the price of the date of vesting. I'm now reading upon various google searches that a section 83(b) should be filed 30 days within receiving the grant. I was not informed about anything called section 83(b), when the grant was made. Was I responsible for this filing or was the company? Will I be paying more taxes because I did not file this form within 30 days of the grant?

Attorney answers (2)

  1. Eric P Rothenberg

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    Contributor Level 12

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    Answered . Section 83 says that stocks you receive, that are subject to a risk of substantial forfeiture (i.e. if you leave the co. early you lose the stock), are not income when they are given to you at any price less than FMV (ingoring the risk of loss). An 83(b) election allows you to take the stock as income (at what you believe is a low price) so that when you sell the stock later it's all capital gain with a low basis from the time of the election. You do this usually with start up stocks that you hope will go up very much at a later time. Without the election, when the risk disappears, then you have compensation (wages). So it appears to me, since you had income from the delivery of the shares, that they were not subject to risk of forfeiture and thus, you could not have made a Section 83(b) election.

    Eric P. Rothenberg, P.C.
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  2. Andrew J Wyman

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    Contributor Level 12

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    Lawyer agrees

    Answered . Employee submits one w/ in 30 days.

    Andrew J Wyman
    www.wymanlegal.com

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