In 2010, M corporation transferred 1000 shares of its common stock worth $90,000 to Y, an employee, in connection with her performance of services for the corporation.The shares, however, are subject to substantial restriction: Y will have to forfeit the shares if she leaves M corporation before 2013.Y makes a § 83(b) election to include the $90,000 value of the shares in her 2010 income.In 2013 Y is still working for M corporation and her 1,000 shares are worth $230,000.Y realizes $140,000 of taxable income on her 2013 return.

Question

Quizplus · Accepted Answer

Y's taxable income in 2013 is not $140,000. Y has already recognized the $90,000 value of the shares as income in 2010 due to her § 83(b) election, so she should only recognize an additional $140,000 - $90,000 = $50,000 of taxable income in 2013 when she realizes the gain on the shares.

In 2010, M Corporation Transferred 1000 Shares of Its Common