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My Stock Purchase Agreement says I'm paying $390k in "I.P." and receiving 300k shares in a startup. In my Section 83(b) election, what do I use for "amount paid"?
I'm cofounding the startup and not putting in any money, only Intellectual Property. That IP was valued at $390,000 but I didn't actually contribute any money. In theory, that means I paid $1.30 in IP per share received. Now, in my Section 83(b) election form, it's asking how much I paid. Par value for the shares is $0.0001 per share. If I indicate that I paid $1.30 per share then the Section 83(b) would show a massive loss, which doesn't seem right.
Calculations below:
The fair market value of the Shares at the time of the transfer to the undersigned: $[ 0.0001 ] per Share x [ 300000 ] Shares = $[ 30 ].
The amount paid for the Shares transferred: $[ 1.30 ] per Share x [ 300000 ] Shares = $[ 390000 ].
The amount to include in gross income is: $[ -389970 ].
Calculations below:
The fair market value of the Shares at the time of the transfer to the undersigned: $[ 0.0001 ] per Share x [ 300000 ] Shares = $[ 30 ].
The amount paid for the Shares transferred: $[ 1.30 ] per Share x [ 300000 ] Shares = $[ 390000 ].
The amount to include in gross income is: $[ -389970 ].
Topics:
posted
August 11, 2021
10:45 AM
last updated
August 11, 2021
10:45 AM
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My Stock Purchase Agreement says I'm paying $390k in "I.P." and receiving 300k shares in a startup. In my Section 83(b) election, what do I use for "amount paid"?
Hi basefrequency,
83(b) election is not supported by TurboTax.
However, below threads have many relevant discussions on this topic. Please refer to Mr. Neil Kossler's write-up.
If the amount paid is equal or larger than fair market value, then the amount to include in gross income is $0.
Hope this helps.
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August 16, 2021
2:35 PM
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My Stock Purchase Agreement says I'm paying $390k in "I.P." and receiving 300k shares in a startup. In my Section 83(b) election, what do I use for "amount paid"?
A few comments related to the question:
- There are too few details to provide sufficient guidance
- There is no indication of what type of entity is being formed
- There is no indication of how many individuals are contributing property or $$
- There is no indication of vesting
- How was the value determined
- Regardless of the responses to the above, you need to have a one on one with a tax professional who can read the agreement, understand the responses to the above questions and ask any other questions that may come about during the discussion.
- Don't be penny wise and pound foolish. Meet with a tax professional.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
Also keep in mind the date of replies, as tax law changes.
August 16, 2021
5:07 PM
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