Question about 83(b) if the RSUs are forfeited

[superlyc]

Hi,  I have some RSUs will be forfeited because I am leaving the company. But the company required us to sign 83(b) election and said the payroll will include that as my income on W2. How can I report this since I will not receive these RSUs? Through capital loss?

[Mike9241]

are you sure they're RSUs and not RSAs. there is a big tax difference.

see this thread for why 

 https://www.equityftw.com/articles/83b-election-on-rsus 

see this for difference between the two

https://www.fidelity.com/products/stockoptions/rstockfaq.shtml#faq1 

this is from reg 1-83-2(a)

In computing the gain or loss from the subsequent sale or exchange of such property, its basis shall be the amount paid for the property increased by the amount included in gross income under section 83(b). If property for which a section 83(b) election is in effect is forfeited while substantially nonvested, such forfeiture shall be treated as a sale or exchange upon which there is realized a loss equal to the excess (if any) of—

(1) The amount paid (if any) for such property, over,

(2) The amount realized (if any) upon such forfeiture.

If such property is a capital asset in the hands of the taxpayer, such loss shall be a capital loss. A sale or other disposition of the property that is in substance a forfeiture, or is made in contemplation of a forfeiture, shall be treated as a forfeiture under the two immediately preceding sentences.

thus if not substantially vested, you cannot take a loss deduction for the amount of income included in your w-2.

[superlyc]

Hi, 

Thanks for your response. But I don’t quite understand. 

It is sort of RSUs and there is a special term. Basically these shares are granted to me under some conditions and they are vested when one condition is satisfied. But they will craw the shares back if I leave before another condition is satisfied. At the time they are vested, the employer held some of them to pay taxes and require us who receive this grant to sign the 83(b). Now I am leaving the company, so I will not receive these shares but they will report the total shares granted as part of my income.

My understanding is  since the taxes are already paid, I may not need to pay more taxes for this part of income. But it may put me in different tax bracket. So I am not sure how this will affect me and how to deal with it

[Mike9241]

i can't answer as to whether what you got were RSUs vs RSAs. The thing with RSUs is 83(b) does not apply so no income should have been added to your w-2.  with RSAs unvested shares are repurchased by the company while with unvested RSUs they're forfeited back to the company

the other weird thing with the 83(b) election, it's the employee who decides whether to make it or not and not the company

see this link

https://carta.com/learn/equity/rsa-vs-rsu/ 

if you are still unsure what they are you'll need to confer probably with a tax lawyer.  it is possible your company is not correctly applying the tax laws especially if what you have are RSUs.