Really easy ESPP question

[BP.]

Most people do non-quals as 'cashless' sales which is a same day exercise and sell.

Yes, most do. They are not always the toughies. It is getting the client to bring in all the docs relating to the transaction, and it is not always certain just what is included in the W-2 as regular compensation. They tend to ignore the 1099-B for some reason. They get scared at that big "proceeds" figure, think they have already covered the transaction via payroll, and . . . well, you know how it goes.

[joanmcq]

Most people do non-quals as 'cashless' sales which is a same day exercise and sell. They are actually pretty easy once you get the hang of them. I created a spreadsheet to auto-calc them. Usually (but not always) you have a loss for the amount of commissions paid at sale. Occasionally you'll find a stock where the price used to calculate the ordinary income portion is different than the actual sale price (different times of day on a volitile stock), and there will be a gain or a bigger loss, but this is pretty rare.

[BHoffman]

I was wrong about that date

But, thanks to everyone here and that Fairmark site it is corrected

[Burke]

Only reason I mentioned it was because you noted it was held over one year. The grant date doesn't really matter.

[BHoffman]

Hi Burke - thanks for the heads up - it was short term, and I did pay attention to the dates

[Burke]

Also, you said income in W2 in Box 12, so I am assuming it was in 2009. Also you mention 1099B so I am assuming that is also in 2009. If he exercised and sold in the same year, it is short term. Not that it matters due to a loss, but it would matter if a gain.

[BP.]

Well then, I will bookmark it. Thanks!

[BHoffman]

Yes it does, and more of my clients are being compensated like this. Hope that little book is going to be good. I'll let you know.

That Fairmark site is great! ST referred me over there too. I had some dividends paid out of a restricted stock thing and was able to find exactly what I was looking for.

[BP.]

Obviously, I need to learn more about these things so am waiting for that book.

I should check out that book, too. I have a few stock option, or what have you, transactions each year, and it always feels like reinventing the wheel.

[BHoffman]

Code 'V' in box 12 indicates a NQSO, not an ESPP. There is a difference to the calculation, although what the OP came up with is correct.

Joan, thank you for confirming that. Obviously, I need to learn more about these things so am waiting for that book. Unfortunately during tax season is not the time to study, and I'm grateful for everyone's help.

[joanmcq]

Code 'V' in box 12 indicates a NQSO, not an ESPP. There is a difference to the calculation, although what the OP came up with is correct.

[BHoffman]

Not always the case.

BHoffman - go to Kaye Thomas's site www.fairmark.com. He has a series of articles on ESPPs. He writes in an understandable language.

"Understandable language" is something I could use right now

I notice Kaye Thomas wrote a book called "Consider Your Options" and am ordering it today.

Thanks for advice.

[New York Enrolled Agent]

But said ordinary income is always included already in box one of the W2 form.
So no problem.

Not always the case.

BHoffman - go to Kaye Thomas's site www.fairmark.com. He has a series of articles on ESPPs. He writes in an understandable language.

[ChEAr$]

I think you also need to note if there is ordinary income here also. Many ESPP plans offer a 15% discount on the offer to buy. I've had ordinary income on all the ESPP transactions with my clients.

But said ordinary income is always included already in box one of the W2 form.
So no problem.

[New York Enrolled Agent]

I have to re-learn this every single time it comes up. I remember that the answer is easy but looks hard.

Nonqualified ESPP held for over a year:

W2 reports $800 in box 12 code V.

1099B reports proceeds of $1,200.

Statement reports option cost of $405.

I think cost basis is: $800 + $405 = $1,205.

Report on Sch D with a resulting $5 loss and that's all there is to it, right?

Thanks for any advice.

I think you also need to note if there is ordinary income here also. Many ESPP plans offer a 15% discount on the offer to buy. I've had ordinary income on all the ESPP transactions with my clients.