83b Election Timing Mistake
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A story about how Shaan almost made a costly tax mistake by not filing an important document, but got lucky when the company failed.
"For one company I just didn't do the 83b election. I was like 'oh I gotta go to the post office' and I just didn't do it. Luckily that company failed and I didn't have to pay the price of that.
The 83b election basically lets you tell the IRS 'tax me now this year on the gain of these shares because I'm going to exercise them now.' It's like if the original strike price was 1 cent and they're valued at 1.5 cents, you're saying 'tax me today on that gain so that when I sell I don't have to pay this huge markup on the exercise.'
You only have 30-90 days to mail it in. You have to write a letter, get it postmarked, and write 'dear IRS please send me proof that you received this.' You have to store that in your records in case you ever get audited."
Shaan Puri
Host of MFM
Shaan Puri is the Chairman and Co-Founder of The Milk Road. He previously worked at Twitch as a Senior Director of Product, Mobile Gaming, and Emerging Markets. He also attended Duke University.