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.It is trading at $10 per share when Sam is issued 1,000 shares, and he does not make a § 83(b) election.At the end of 2019, the stock is selling for $13 per share.Sam remains a full-time employee of Pony for the required two-year vesting period, at which time the stock is worth $30 per share (in 2021).Sam sells his 1,000 shares in 2023 at $36 per share.What amount and type of income will Sam recognize in 2023?

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In 2023, Sam will recognize a $6,000 capital gain, which is the difference between the sale price ($36,000) and the value of the stock when it vested ($30,000). Since Sam did not make a § 83(b) election, the stock is taxed as ordinary income at its fair market value when it vests, not when it is sold. The gain realized upon the sale of the stock over its value at vesting is treated as a capital gain.

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