Pony, Inc., issues restricted stock to employees in July 2017, 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 the stock is issued. An employee, Sam, decides to make the § 83(b) election with his 1,000 shares. At the end of 2017, the stock is trading at $13 per share. How much income, if any, must Sam recognize in 2017?

Question

Quizplus · Accepted Answer

If an employee makes a § 83(b) election with restricted stock, they are electing to include the value of the stock in their income in the year it is issued, rather than waiting for the vesting period to end. Since Sam made the election with 1,000 shares valued at $10 each, he would recognize $10,000 of ordinary income in 2017. The increase in the stock price to $13 per share by the end of the year is not relevant for calculating his income recognition.

Pony, Inc, Issues Restricted Stock to Employees in July 2017, with with a Two-Year