Are You Eligible for Tax-Free Capital Gains?
Under Section 83(b) of the Internal Revenue Code (“Section 83(b)”), a taxpayer who receives certain property subject to vesting as compensation for services (for example, a restricted stock award granted by the taxpayer’s employer) may elect to include in gross income the fair market value of the property at the time of the transfer over the amount (if any) paid for the property (an “83(b) election”). If an 83(b) election is made, the taxpayer recognizes income on the property in the year of the transfer, rather than in a potentially later year when the property becomes vested.
In summary, an 83(b) election, the early exercise of a stock option could result in zero tax at exercise to all vested and unvested shares.
Samra Wealth Management is not a tax advisor. All decisions regarding the tax implications of your investments should be made in consultation with your independent tax advisor. Samra Wealth Management does not provide tax or legal advice. We will work with your independent tax/legal advisor to help create a plan tailored to your specific needs. This material is not intended to replace the advice of a qualified tax advisor, attorney, and accountant or insurance advisor. Consultation with the appropriate professional should be done before any financial commitments regarding the issues related to the situation are made. The material contained herein is for informational purposes only and does not constitute tax advice. Investors should consult with their own tax advisor or attorney with regard to their personal tax situation. A portion of income may be subject to State and local taxes.