Option exercise question

[taxxcpa]

My client retired from a major corporation about three years ago. This year she received a "Transaction confirmation" for some options she exercised showing:
Market value at exercise $ 442648
Exercise Cost $ 420123
Taxable Income $22525
Less Costs:
Federal tax $5631.36
Soc Sec, MCare, etc $XXXXX
Net cash proceeds $ 15437

The same broker also provided a Form 1099-B showing
Sale $ 442464
Cost/basis $ 442648
Loss 184
Wash sale loss disallowed $ 126

THE PROBLEM:
The above is NOT a form that goes to the IRS like a W-2 or 1099
What kind of form should she get? From whom--broker or former employer?

[FEDUKE404]

Cashless option exercise likely

It looks like she exercised an option (as a retiree??) and the difference between her option cost and FMV at the time of purchase was added to her income, i.e. taxable ordinary income.

If the cashless option exercise was taken, the stock was sold as soon as she exercised option/bought it (think very STCG !!), and proceeds reported via Form 1099-B. The cost basis was then raised from what she "paid" to a higher amount, thus the two fairly close numbers on the Form 1099-B. The loss was likely created by sales costs, with a little bit of wash sale stuff thrown in (facts unknown here).

I've seen a lot of these with employees, to include a "V" entry in Box 12 of a W2, and AMT can even rear its ugly head. Never ran across one for a retiree....

On what tax document is the federal withholding showing up?? That might clarify things. My guess is you have the documents but not all of the facts.

Good luck!

FE

[Burke]

They should have issued a W-2, regardless of the fact that she is a retiree. They sold the stock and took the taxes out of the proceeds. You put XXXX in the SS/MC info, but I assume they are some figures there? $22,525 less $5,631 = $16,894. Or did they take out state taxes as well?

[FEDUKE404]

W2 does seem a strong possibility

They should have issued a W-2, regardless of the fact that she is a retiree. They sold the stock and took the taxes out of the proceeds. You put XXXX in the SS/MC info, but I assume they are some figures there? $22,525 less $5,631 = $16,894. Or did they take out state taxes as well?

You said what I was already thinking as a reasonable possibility....i.e. the retiree likely has a W2 rattling around somewhere out there.

FE

[Gary2]

...
The same broker also provided a Form 1099-B showing
...
The above is NOT a form that goes to the IRS like a W-2 or 1099
What kind of form should she get? From whom--broker or former employer?

How could there be a 1099-B that doesn't go to the IRS?

What type of options? ISO, ESPP, or non-statutory?

[joanmcq]

I think the OP was refering to the confirmation sheet.

There's gotta be a W-2 involved if federal and FICA were withheld. Otherwise, the 'taxable wage' amount would just go on line 7.

Sounds like an extension to me.

[Gary2]

Given both the timing (three years after leaving service) and the FICA withholding, that implies non-statutory options. My take is that a W-2 is required, but I'd consider doing a 4852 for it rather than waiting.

[taxxcpa]

She has now realized that she needs a W-2.
At first it didn't dawn on me that since there was Social security withheld, there was no other way that it could be handled other than with a W-2--or a Form 4852.

She now expects to obtain the W-2.