Is employer stock compenstion or Cap Gain?

[John of PA]

Hi everyone it's been a while. Employee received 5% of her employer's (small company) stock back when she signed on as an employee of the company. At the time the company was loosing money and the stock was worthless. The stock is now worth 50,000 and the company wants to buy her out. Would this be a capital gain or taxable compentation to her? Her company wants to send her a 1099-MISC for the 50,000 but I say it's a capital gain and she should get a 1099-B.

[jimmcg]

Hi everyone it's been a while. Employee received 5% of her employer's (small company) stock back when she signed on as an employee of the company. At the time the company was loosing money and the stock was worthless. The stock is now worth 50,000 and the company wants to buy her out. Would this be a capital gain or taxable compentation to her? Her company wants to send her a 1099-MISC for the 50,000 but I say it's a capital gain and she should get a 1099-B.

Nice to hear from you again John. Was there any contractual arrangement which specified what the five percent given was in return for? Signing bonus, future services, contingent upon staying for a period of time, Etc........Were there any contractual conditions or restrictions related to the sale of the stock, time expiration, who sold to, etc..................Certainly would be beneficial to your client to be taxed at cap gains rates.