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I have 50,000 shares of restricted stock that were granted…

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I have 50,000 shares...

I have 50,000 shares of restricted stock that were granted to me via a contribution agreement in exchange for my IP. The shares were granted in July 2015 and fully vested by the end of 2016. I did not file an 83(b) at that time. The value of the shares at the time of the grant was $.0001. The value at the time of vesting was also $.0001, and the value today is very nearly $.0001. What actions can I take today to exercise those share such that the proceeds of a future sale will be taxed at capital gains rates (instead of ordinary income)? Thank you

Accountant's Assistant: The Expert will know how to help. Is there anything else the Expert should be aware of?

I been given the advice to exercise the vested share with the company (it's a start up), meaning write them a check for the value of the shares (50,000 X $.0001) and then report that (somehow) to the IRS

Submitted: 11 months ago.Category: Tax
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Answered in 22 minutes by:
9/22/2017
Tax Professional: Lev, Tax Advisor replied 11 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,334
Experience: Taxes, Immigration, Labor Relations
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Section 83(b) election is considered when you’re given equity in a company as compensation (which generally is taxable).
In your situation - you are given equity in exchange for the asset (IP) - and that is NOT covered by section 83(b) election.
First of all - you were granted shares - not option to purchase shares - so we need to determine the FMV of shares - and that will be considered as the sale price of your IP.

That FMV should consider all circumstances including restriction and the risk of forfeiture.

The same FMV will be your basis is shares you acquired and will be used to calculate your gain on disposition.

If is possible to treat that exchange of the asset for shares as nontaxable transaction under section 351 - when certain conditions met, but in this case your basis in shares you received will be zero.

Let me know if you need any help with reporting.

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