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Subject:   Re Stock Grant - 83b tax effects as “comp”?
Date:   Thu, 03 Dec 2009
From:   John

I received a stock grant with a “clawback” vesting structure. If I make a Section 83(b) election, what will be run through payroll?

Answer

Date:   7 Dec 2009

Hello John,

A Section 83(b) election is your election to disregard the "clawback" vesting, and treat the stock "as if" is was fully vested when received. Therefore, the entire grant would be currently taxable based on the fair market value on the grant date and subject to the related payroll taxes as of the grant date.

The election has to be made within 30 days of the grant date.

If you can’t afford to pay the taxes and making the election would put you in financial distress, you probably shouldn’t make the election.

Good luck!

Mike Gray

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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.