The company can only take a tax deduction for amounts on which award recipients owe income taxes. If the employee does not have to pay for the shares, then the taxable amount is the full value of the award. Filing an 83(b) election serves to accelerate the taxation event to the grant date, instead of waiting to pay taxes when the award vests, and any increase in the value of the shares after the election is filed and income is recognized will be taxed as capital gains. In this fact scenario, the CEO received the award for free, chose to file an 83(b) election and accelerate the taxation event to the grant date, and so recognized income of $10,000 upon the filing of the 83(b) election. The company is allowed to claim a tax deduction of $10,000 because that was the amount the CEO owes income taxes on. The company will have to report that income on the CEO's W-2 in order to claim the corporate tax deduction, but it will not have to prove that the CEO claimed that income on his or her annual tax return.

A. The company cannot claim a tax deduction.
B. The CEO owes income taxes on the full value of the award.
C. The CEO recognized income of $10,000 upon filing the 83(b) election.
D. The company can claim a tax deduction of $5,000.