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What Is the 83(b) Election? The 83(b) election is a set of regulations under the Internal Revenue Code (IRC) that enables an employee, or startup founder, to be taxed on the total fair market value of restricted stock or options when they are granted rather than later upon vesting by sending a letter to the IRS. Restricted shares are unregistered shares of ownership in a corporation issued to corporate affiliates, such as executives and directors. Along with the value of restricted stock, you can include the spread of your options in your election, i.e., the difference between the strike price — the options’ exercise price — and the shares’ fair market value when exercising them.1 To make the election, your shares must be subject to a considerable risk of forfeiture before vesting; for example, if you would lose the shares by moving to another company before the shares are vested. The advantage of the election is the ability to pay taxes on the restricted shares earlier, hopefully before the stock price appreciates. Section 83(b) elections only apply to stock subject to vesting because grants of fully vested stock will be taxed when granted.