Restricted Stocks

[superman]

Client recieved restricted stock about 4 yrs ago. They were vested in 2010 and became common stock. The question I have is that he recieved a 1099B for the stock sale and when he called his HR dept at his job they said the sale was added to his income on his W2.

Problem he has this 1099B and does not know the value of the stock and when he actually recieved the stocks as common shares. To further impact the sitution there was federal tax withholding out of the sale of the restricted shares because he did not fill out the proper paperwork from what he was told.

Does anyone know what to do here? I would put it on the Sch D but I have no idea what the value is or even if that is right?

Thanks for any help.

Superman

[solomon]

Client recieved restricted stock about 4 yrs ago. They were vested in 2010 and became common stock. The question I have is that he recieved a 1099B for the stock sale and when he called his HR dept at his job they said the sale was added to his income on his W2.

Problem he has this 1099B and does not know the value of the stock and when he actually recieved the stocks as common shares. To further impact the sitution there was federal tax withholding out of the sale of the restricted shares because he did not fill out the proper paperwork from what he was told.

Does anyone know what to do here? I would put it on the Sch D but I have no idea what the value is or even if that is right?

Thanks for any help.

Superman

If this were a same day sale, Schedule D probably would be close to a wash.
The amount on the W-2 detail (assuming he has it) should be about the same as the net proceeds on the 1099-B.

[superman]

The amounts are not close

He has the amount and it is about 1200 off from the 1099B. I do not know of the sales date but these were the numbers he provided to me.

Is a SCH D the way you would do this? I am thinking this is the best way. The only problem I have is that he still owns the common shares so what would I use for the cost basis when and if these shares are sold? It just seems like a double taxation issue somewhere. Am I just overthinking this?

[solomon]

He has the amount and it is about 1200 off from the 1099B. I do not know of the sales date but these were the numbers he provided to me.

Is a SCH D the way you would do this? I am thinking this is the best way. The only problem I have is that he still owns the common shares so what would I use for the cost basis when and if these shares are sold? It just seems like a double taxation issue somewhere. Am I just overthinking this?

If he still owns some shares, it seems just enough was sold to cover payroll taxes.

[solomon]

I gather he paid nothing for the stock. His basis, then, is the amount on his W-2. This would be used for the cost to report now and in the future when he sold more shares. Isn't the sales date on the 1099-B? When nothing is paid for the stock, the market value on the date of vesting is what should have gone on the W-2.

[AZ-Tax]

Similar Situation

I gather he paid nothing for the stock. His basis, then, is the amount on his W-2. This would be used for the cost to report now and in the future when he sold more shares. Isn't the sales date on the 1099-B? When nothing is paid for the stock, the market value on the date of vesting is what should have gone on the W-2.

Client had RSU but only a few shs got sold to cover income taxes. The rest were not sold. I have a 1099-B with a $28814 proceeds (sold 551 shs & rounded up) with of course NO cost basis. Then I have what looks to be an "activity" statement on smaler then a std size paper. Its report 551 shs sold @ 52.340500 per sh which equals $28840 (rounded up). I reported on Sch D the $28840 as the cost basis and the $28814 as the gross sale price which generated a loss of $26 which I am assuming is the commission. His (2010) W-2 box 12 - V is reporting: $9692. Your thoughts?

If I understood Solomon in his reply he said the amt reported on the TP’s W-2 box 12 – V will be the cost basis or future share sales. Based on that, I would take his $9692 and divide it by the total number of shs but I am guessing that total number is more then the 551, correct?

[Scrooge]

He'll actually have a loss

The difference between what he can buy the stock and the market price is income reported on his W2 (Code V I think). In a "no cash" transaction the broker buys the shares and immeditely sells them. From the proceeds check the broker keeps the difference between the restricted price (which is your money on as noted on your W2) and the market price. They also keep their commission, so their is a modest cost which increases your basis resulting in a loss the amount of the commission.

[AZ-Tax]

Understand Scrooge but...

The difference between what he can buy the stock and the market price is income reported on his W2 (Code V I think). In a "no cash" transaction the broker buys the shares and immeditely sells them. From the proceeds check the broker keeps the difference between the restricted price (which is your money on as noted on your W2) and the market price. They also keep their commission, so their is a modest cost which increases your basis resulting in a loss the amount of the commission.

When only partial shs of the RSU were sold, what exactly if the cost bais per sh for future sh sales?

[Gary2]

Client had RSU but only a few shs got sold to cover income taxes. The rest were not sold. I have a 1099-B with a $28814 proceeds (sold 551 shs & rounded up) with of course NO cost basis. Then I have what looks to be an "activity" statement on smaler then a std size paper. Its report 551 shs sold @ 52.340500 per sh which equals $28840 (rounded up). I reported on Sch D the $28840 as the cost basis and the $28814 as the gross sale price which generated a loss of $26 which I am assuming is the commission. His (2010) W-2 box 12 - V is reporting: $9692. Your thoughts?

If I understood Solomon in his reply he said the amt reported on the TP’s W-2 box 12 – V will be the cost basis or future share sales. Based on that, I would take his $9692 and divide it by the total number of shs but I am guessing that total number is more then the 551, correct?

If the W-2 was done properly, code V only applies to non-statutory stock options, not RSUs.

For the RSUs, done properly (by the employer), there should be a separate statement showing the FMV that was used (usually at the time of vesting) and added to the W-2 box 1. That would represent the basis of the entire block of RSUs that vested. Divide by the number of shares, multiply by the number of shares that were actually sold and add the $26 commission to get the cost basis for the 1099B. Provide the client with the per-share basis for any future sales.

For the non-qualified stock options, there is almost always a sale as well. The basis would be the Code V plus the exercise price. You still need to know the number of shares exercised and the exercise price, which may be on a separate statement, or possibly on the same page as the RSUs, or even a separate line item in the table of activity on that page. After that, the math is similar. The $9692 is generally not the entire basis because of the exercise price. You may be able to infer the exercise price from the difference between the amount reported and the amount actually received by the client, but you'll still need to know the total shares.

In both cases, the gain or loss for the forced sales is typically tiny in comparison to the full amount, coming from the commission and the difference between the FMV (which is the daily average) and the actual sale price. If the sale is the day after exercise/vesting, then that latter difference could be larger than expected. For any stock that's retained, make it extremely clear to the client that they need to keep a good record of the basis, because it will be impossible to redetermine in the future through the usual brokerage statements.