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

Question

Quizplus · Accepted Answer

The statement that any loss is limited to $3,000 is false. The section 83(b) election allows the employee to pay taxes on the value of the stock at the time of grant, rather than at the time of vesting. This can be beneficial if the stock is expected to increase in value. The election must be made within 30 days of the grant date and freezes the value of the compensation as of that date. However, if the employee leaves before the vesting date and the stock has decreased in value, they may still experience a loss.

Which of the Following Is False Regarding a Section 83(b)