Question

Which of the following is false regarding a section 83(b) election? Multiple Choice The election must be made within 30 days of the grant date. The election is an important tax-planning tool if the stock is expected to increase in value. The election freezes the value of the employee's compensation as of the grant date. If an employee leaves before the vesting date, any loss is limited to $3,000.

Answer 1

Answer:

D) If an employee leaves before the vesting date, any loss is limited to $3,000.

Explanation:

The 83(b) election can be regarded as

provision made under the Internal Revenue Code, which provide an option for an employee as well as startup founder to pay their taxes on the total fair market value of restricted stock within the granting time. 83(b) election can as well be applied to equity which is subjected to vesting, and Internal Revenue Service will be alerted so the body can tax the elector for the ownership at granting time instead of time of stock vesting.

It should be noted that in section 83(b) election

✓The election freezes the value of the employee's compensation as of the grant date.

✓The election must be made within 30 days of the grant date.

✓ The election is an important tax-planning tool if the stock is expected to increase in value.