Stevie recently received 1,035 shares of restricted stock from her employer, Nicks Corporation, when the share price was $9 per share. Stevie's restricted shares vested three years later when the market price was $12. Stevie held the shares for a little more than a year and sold them when the market price was $15. Assuming Stevie made a section 83 (b) election, what is the amount of Stevie's ordinary income with respect to the restricted stock?

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12 July, 15:02

Stevie recently received 1,035 shares of restricted stock from her employer, Nicks Corporation, when the share price was $9 per share. Stevie's restricted shares vested three years later when the market price was $12. Stevie held the shares for a little more than a year and sold them when the market price was $15. Assuming Stevie made a section 83 (b) election, what is the amount of Stevie's ordinary income with respect to the restricted stock?

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Jakobe Bailey · Answer 1

9,315

Explanation:

The 83 (b) election of the IRC which allows the employe of restricted stock to pay taxes on the fair market value at the time were granted.

It applies when the stocks are subject to vesting

The 83 (b) election becomes useful when the employee has confidence that market value will increase and thus, saving taxes in the future.

If the market price decrease over the years or the company files for bankrupcy, the taxpersons will have pay income taxes for a worthless amount.

Also, if he leaves the company before esting the shares, it would had pay taxes for shares it won't receive.

So, resuming: under election 83 (b) we use granted time value

1,035 x 9 = 9,315