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Old 03-30-2016, 08:42 AM
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K-1 basis after an 83(b) election

I received a k-1 from my firm for 2015. I have not contributed anything other than time and effort. I did file an 83(b) election. The shares were granted fully vested in 2015, and so this is the first year. The partnership took a significant loss (we are a startup in pre-profitable stage). Would the amount claimed on the 83(b) election be my starting basis? It would seem to me that the amount I claimed on the 83(b) election is the amount of income I am declaring these shares to be worth and received as income, which is really my contribution to the firm. Any thoughts or pointers in the right direction would be much appreciated.



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Old 03-30-2016, 03:50 PM
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I received a k-1 from my firm for 2015. I have not contributed anything other than time and effort. I did file an 83(b) election. The shares were granted fully vested in 2015, and so this is the first year. The partnership took a significant loss (we are a startup in pre-profitable stage). Would the amount claimed on the 83(b) election be my starting basis?========>no not you starting basis; in general, within 30 days of a member/partner?s purchase of Equity the member/partner need to decide whether or not to make an election under Section 83(b); by making an election under Section 83(b) ,you choose to have the federal income tax treatment of its purchase of the Equity determined at the time of ?transfer? rather than at some later date when unrestricted ownership of the Equity ?vests.as you made the election, yiu must include as compensation income for the year of transfer the fair market value of the Equity at the time of transfer as you said you did not contribute anthing to the LLC.so,there will be no U.S. federal income tax consequences at the time when the Equity vests. When subsequently sell or otherwise dispose of the Equity in a taxable transaction, any appreciation in the value of the Equity since you acquired it under the Section 83(b) Election generally will be taxed as capital gain, rather than ordinary income.but without the electon, in any taxable year in which Equity vests you will be required to include in your gross income as ordinary income.


It would seem to me that the amount I claimed on the 83(b) election is the amount of income I am declaring these shares to be worth and received as income, which is really my contribution to the firm=>>As mentioned above it depends.



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