Pony, Inc., issues restricted stock to employees in July 2019, with a two-year vesting period and an SRF.An employee must remain a full-time employee of Pony for two years after the restricted stock is issued.The stock is trading at $10 per share when it is issued.An employee, Sam, decides to make the § 83(b) election with his 1,000 shares.At the end of 2019, the stock is selling for $13 per share.What amount, if any, can Pony take as a compensation deduction?

Question

Quizplus · Accepted Answer

Pony, Inc. can take a compensation deduction of $10,000 in 2019, which is the value of the stock at the time it was issued. The § 83(b) election allows the employee to be taxed on the stock at the time of grant rather than at vesting, and correspondingly, the employer gets to take the compensation deduction at the time of the grant.

Pony, Inc, Issues Restricted Stock to Employees in July 2019, with with a Two-Year