What happens if an employee who makes an election leaves his job before the stock substantially vests? In that case, the employee forfeits his stock and is allowed a limited loss deduction. The amount of the deduction on forfeiture is limited to the amount paid for the stock, less the amount realized on the forfeiture (if any). Reg. §1.83-2(a). Notably, though, no deduction is allowed for the amount the employee previously included in income by making the 83(b) election.
ISO forfeit