An engineer joins your startup and gets 40,000 restricted shares at $0.01 FMV. Four years later, FMV has climbed through each vesting date and sits at $5. Without an 83(b) election, the IRS taxes each vested tranche at its then-current value — ordinary income recognized year after year, with your payroll team withholding at every vesting date.

File the 83(b) within 30 days of grant and the math inverts. The employee recognizes $400 of income up front, pays ordinary tax once, and appreciation becomes eligible for long-term capital gains treatment once the holding period is met.

The election is irrevocable. Miss the 30-day window and there's no extension, no retroactive fix. Leave before vesting and the tax already paid isn't refundable.

For founders and early hires sitting on low-FMV stock with real growth ahead, the filing mechanics matter. Use Form 15620, file via certified mail or the IRS's new electronic channel, keep the employer copy on record.

SpaceX announced on April 21 that it has an option to acquire Cursor for $60B later this year, or pay $10B as a "collaboration fee" if it walks. The offer arrived hours before Cursor was set to close a $2B primary round at $50B, co-led by a16z with Thrive, Nvidia, and Battery participating.

The mechanic is what founders should study. A $10B floor payment to a live cap table, structured as an option rather than a binding acquisition, sits somewhere between a strategic investment, a licensing deal, and a deferred M&A earnout. It also preempts a priced round that was already papered.

If you're running a parallel process with a potential strategic buyer, revisit your ROFR language, preferred consent rights, and exclusivity clauses now. Deal structures like this will get copied.

Sources: Bloomberg | TechCrunch