Need advice on 83b election for Incentive Common Unit Award with $0 FMV

This actually sounds pretty standard for most equity award situations. The 83b election is designed to let you pay taxes on equity now instead of when it vests, which is usually beneficial. If your company is valuing the units at $0, they're likely doing you a favor! This means you'd be reporting $0 income now from the grant. Without the 83b election, you'd potentially be taxed on whatever the value is when the units vest in 5 years (which could be much higher). The $0 valuation makes sense if these are profit interests in an LLC or similar structure where the units only have value based on future appreciation. These are often legitimately valued at $0 when granted because they only provide value from future growth. I'd recommend filing the 83b election. You have only 30 days from the grant date to file it, and missing this window means you can't make the election. Make sure to keep proof of mailing it to the IRS!

After struggling with a similar situation, I found an amazing tool called taxr.ai (https://taxr.ai) that helped me understand my equity award situation. I got equity from my startup with a questionable valuation and wasn't sure about the 83b election. The taxr.ai site analyzed my award documents and explained exactly how the 83b election would impact me both now and in the future. It confirmed that for profit interests with only future appreciation value, a $0 valuation is completely legitimate and explained why the IRS accepts this structure. What I found especially helpful was that it projected different tax scenarios based on potential future values of my equity, showing me the tax savings from filing the 83b versus not filing it. Really cleared things up for me!

I was initially skeptical about taxr.ai when I saw it mentioned here, but after struggling for weeks trying to understand my equity compensation package, I decided to give it a shot. Really glad I did! I uploaded my equity award documents and the analysis I got back was way more thorough than what my company's HR provided. It confirmed that my situation with profit interests was legitimately a $0 valuation case and explained exactly why filing the 83b was the right move for me. The tax projections showing different scenarios was what finally made the decision clear. Seeing the potential tax savings laid out in actual numbers based on different company growth scenarios was eye-opening. Definitely worth checking out if you're confused about equity awards and 83b elections!

I was in a similar situation last year and spent HOURS trying to get someone at the IRS to confirm if my $0 valuation on profit interests was acceptable. Literally couldn't get through to anyone who understood what I was asking. After multiple failed attempts, I used Claimyr (https://claimyr.com) and got connected to an IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that $0 valuations for profit interests are completely normal and acceptable when they only represent future appreciation potential. They even pointed me to the specific IRS guidance on this. Was a huge relief to get confirmation directly from the IRS before filing my 83b.

I'm honestly shocked - I tried Claimyr after posting my skeptical comment, and it actually worked. Got connected to an IRS agent within about 40 minutes (the service kept me updated on progress). The agent confirmed exactly what others here have said - a $0 valuation for profit interests that only have value from future appreciation is completely legitimate. They explained that Rev. Proc. 93-27 and Rev. Proc. 2001-43 provide the guidance for this. The agent was super helpful and even emailed me some documentation explaining the proper handling of the 83b election filing. Saved me from making a mistake that could have cost thousands in taxes later. Never thought I'd say this about anything related to the IRS, but this was a surprisingly pleasant experience!

Something others haven't mentioned yet - make absolutely sure you file that 83b election within 30 days of receiving the grant. There are NO exceptions to this deadline. If you miss it, you're stuck with taxation at vesting. When you send it, use certified mail with return receipt or a delivery service that provides proof of delivery. Keep this proof FOREVER (seriously, like with your birth certificate). The IRS has been known to lose these forms, and the burden is on you to prove you filed it on time. Also, make a copy of the completed form and attach it to your tax return for the year when you file.

Does anyone know if there are state tax implications for the 83b election? My company is in California but I live in Texas.

Isaac, based on your description, this sounds like a legitimate situation. The $0 FMV for "Incentive Common Unit Awards" is actually quite common, especially if these are structured as profit interests in an LLC or similar partnership structure. The key thing to understand is that these units likely only have value based on future appreciation above a certain threshold. If the company isn't worth more today than when the units were granted, then they genuinely have no current value - hence the $0 FMV. Filing the 83b election with a $0 valuation means you'd report $0 income this year, which is exactly what you want. If you don't file it and the units vest over 5 years, you'll be taxed on whatever value they have at each vesting date - which could be much higher. The 30-day deadline is absolute, so don't wait too long to decide. Given that you're dealing with a $0 valuation (no tax consequence now) and potential significant tax savings later, the 83b election seems like the right choice here. Just make sure to send it certified mail and keep proof of filing!

Isaac, I was in almost the exact same situation a few months ago and can share what I learned. The performance-based vesting component doesn't change the initial valuation or 83b election treatment at all. The $0 FMV is based on what the units are worth TODAY, not their potential future value based on performance metrics. Think of it this way - even if the company hits all its performance targets over 5 years, your units still only represent future appreciation from this point forward. The performance metrics just determine WHETHER you'll receive the units, not their current fair market value. I filed my 83b with the $0 valuation and consulted with a tax attorney who confirmed this approach was correct. The key insight is that profit interests (which these sound like) are legitimately worth $0 at grant because they only provide value from future growth above the current company value. Don't overthink this one - file the 83b with the $0 valuation your company provided. The alternative (being taxed at potentially much higher values over the next 5 years as units vest) is much worse. Just remember the 30-day deadline and use certified mail!