Stock Grant received in 1978

[AZ-Tax]

New client gives me what I believe is NEI (not enough info). Exactly from clients email: "The first document was for a stock grant I received in 1978. The company just re-purchased it from me. Original value was $1.00/share; valued now at 87 cents a share. I did not receive a 1099 on this"

Meaning he did not recieve a 1099-B nor did he receive a W-2 from this company in 2010 due to no longer working for them. I have not seen a stock grant for some time maybe somebody would like to refresh my memory. Does a stock grant work similar to a stock option where there is a share grant price? My client received a check for $22K. I am guessing I need to email my client and ask him the following: I need a cost basis on these shares or stock grants. Was the stock grant converted or exercised into shares and if so what was the stock grant price (per share)? If not converted, were you given the stock grants?

Your thoughts

[Burke]

Wow. Unless this is something I haven't heard of before, I think a stock grant and a stock option are basically one and the same. They are usually "granted" at a particular point in time, then sometimes "vested" at a later date, sometimes "exercised" and sometimes not. All the ones I have ever seen expired at a given date if not exercised, the longest being10 years. Apparently this one was issued under some very different rules back in 1978. I think he is going to have to dig for some info here. I doubt if the company issued a 1099B since they bought it back themselves.

[Gary2]

An option is not the same as a stock grant. An option will always have a purchase price, while grants often won't. With an option, you can't pay the purchase price until you vest. With a grant, you might be required to pay at the time of the grant.

For ISOs, they're not taxed until you sell them (except for AMT). For grants, they're taxed when you vest.

[AZ-Tax]

Gary and Burke...

Thanks for your help. The TP replied to me by saying he was given the stock grants for free and never exercised them therefore he has $0 cost basis.

[Gary2]

Thanks for your help. The TP replied to me by saying he was given the stock grants for free and never exercised them therefore he has $0 cost basis.

If he was given them for free, they should have added the FMV into his W2 for the year of vesting, which means that amount would be his basis.

[FEDUKE404]

Huh?

Thanks for your help. The TP replied to me by saying he was given the stock grants for free and never exercised them therefore he has $0 cost basis.

If that is the case, how did he ever get the stock in the first place?

I tend to agree with Gary2 - it appears he was "given" these shares in some way and there is a cost basis out there, likely on a long-forgotten pay stub.

FE

[AZ-Tax]

Gary and FE, its pretty much out of my hands...

As mentioned on my first post, this was done back in 1978 and TP does not recall if they were included in his W-2 and cannot locate his 1978 stuff. He has not worked for the company in yrs. I am just covering my blank (CMA) in case the IRS wants more info especially since my guarantee is pay interest and/or penalties any error I make on the tax return. The TP is pretty knowledgable about this stock grant thing etc. and he tells me he has $0 cost basis.

[JohnH]

How could there be any penalty or interest on any errors you make? As along as you have the correct selling price you (I'd want to see that in writing) you're good to go. The only error you could make would be an overstatement of income. Basis can't be below -0-, so there's no understatement of income possible, is there?

[AZ-Tax]

$ 0 cost basis....I am covered

Exactly, $0 cost basis...I am covered. You cant help those who refuse to help themselves. I am sure many of you have tax clients like that.

[Burke]

You're right. And so is Gary2. It was in his W-2 (or should have been) when it vested. But, as you say, if they don't have records...... although the company might. They knew he still owned the grant, and were able to buy it back. You could always offer to amend if he could find this out from the company. If he doesn't want to bother, then oh, well.....