ESPP Sale in Box 14

[Possi]

If there is "ESPP Sale" and a dollar amount in box 14, does that mean it has been included in box 1 wages, and I can add that to the basis already reported on the 1099B?

[Roland Slugg]

Well, the ordinary income portion of the selling price should be included in boxes 1, 3 (up to the FICA limit) and 5 of the W-2. But I believe the spread amount ... i.e. the ordinary income portion ... should be in box 12 (code "V"), not box 14.

The employee (or former employee) should also receive a 1099-B reporting the gross proceeds. The taxable capital gain, then, will be this amount minus: (1) less the employee's cost, and (2) the ordinary income portion included on form W-2.

[Gary2]

Well, the ordinary income portion of the selling price should be included in boxes 1, 3 (up to the FICA limit) and 5 of the W-2. But I believe the spread amount ... i.e. the ordinary income portion ... should be in box 12 (code "V"), not box 14.

The employee (or former employee) should also receive a 1099-B reporting the gross proceeds. The taxable capital gain, then, will be this amount minus: (1) less the employee's cost, and (2) the ordinary income portion included on form W-2.

Code V is for non-statutory options only. If it's being used for ESPP, then it's wrong. This is one of the most common mistaken interpretations I see from tax preparers.

There should be a 3922 for an ESPP which will provide all the info needed to calculate the ordinary income. If the employer is aware of the sale and if the employee is still employed when the stock is sold, then the employer is required to include the ordinary income in box 1. The fact that they report additional info in Box 14 is evidence of both preconditions, and thus strongly suggestive but not proof that they included the proper amount in box 1.

[Possi]

I should have given you the complete picture

I'm sorry... I thought I was asking a dumb question, so I kept it minimal!

I have had code V in box 12 in the past, but never have I see this:
box 14 is ESPP Sale 2405.22
There is a 3922 with the date the option was exercised, but the figures don't match the ESPP sale price. Instead, they are as follows:
Date option was granted 01-01-2012
Date option was exercised 06-30-2012
FMV on grant date 59.08
FMV on exercise date 65.91
exercise price pd per share 50.22
no. of shares transferred 58
exercise price per share determined as if the option wsa exercised on the date shown in box 1 (01-01-2012) 50.22

The ESPP sale in box 14 is 2405.12

And yes, there is a 1099B which shows gross proceeds of 4704.49 with a cost basis of 4986.75.

It does not look like any reports have anything in common (figure-wise) with the other reports. I have done the box 12 code "v" where I am able to bump up the basis when the sale was added to the W2, but never have I seen this. Maybe I just report the 1099B as it is, and I'm putting too much into this.
???

[Edward]

I agree - just report whats on the 1099-B - thats what IRS will be looking for anyway.

[mactoolsix]

I would do more asking

OOPS Deleted - Miss read previous post
Mike

[Gary2]

I'm sorry... I thought I was asking a dumb question, so I kept it minimal!

I have had code V in box 12 in the past, but never have I see this:
box 14 is ESPP Sale 2405.22
There is a 3922 with the date the option was exercised, but the figures don't match the ESPP sale price. Instead, they are as follows:
Date option was granted 01-01-2012
Date option was exercised 06-30-2012
FMV on grant date 59.08
FMV on exercise date 65.91
exercise price pd per share 50.22
no. of shares transferred 58
exercise price per share determined as if the option wsa exercised on the date shown in box 1 (01-01-2012) 50.22

The ESPP sale in box 14 is 2405.12

And yes, there is a 1099B which shows gross proceeds of 4704.49 with a cost basis of 4986.75.

It does not look like any reports have anything in common (figure-wise) with the other reports. I have done the box 12 code "v" where I am able to bump up the basis when the sale was added to the W2, but never have I seen this. Maybe I just report the 1099B as it is, and I'm putting too much into this.
???

How many shares are reported on the 1099B? Might the 1099B may be reporting the sale of more than one batch of ESPP shares?

If the sale was only 58 shares, then gross proceeds of $4704.49 suggests a sale price of $81/share - an impressive gain within six months. Hence my wondering if there are more shares involved.

[Possi]

another 1099B

She just came up with another 1099B, so it's all covered.
Thanks for all your help!

[joanmcq]

The ESPP sale amount listed in box 14 is the amount that was added to wages because it was a disqualifying sale. It's added to basis. However, with the new basis reporting requirements, the 1099-B will hopefully include this amount in basis. Since you've got all the numbers, you may want to work it out and double check the basis on the 1099-B. The amount added to wages is the amount of discount reflected in the purchase price. If the shares are held a certain amount of time, the discount is taxed at capital gains rates, not ordinary income. Your client held the shares only 6 months, so they have wage income.

[Y2KEA]

Loss on sale

If the gain of 2405.12 was included in box 1 as ordinary income, the S/T loss on the disposition according to the 1099B is 282.26 probably due to trading fees imposed by the brokerage firm handling the sale.

[Gary2]

If the gain of 2405.12 was included in box 1 as ordinary income, the S/T loss on the disposition according to the 1099B is 282.26 probably due to trading fees imposed by the brokerage firm handling the sale.

That's possible, but it seems like high trading fees. I rarely see more than $30-$50, regardless of the number of shares or value.

The other possibility is simply a decline in stock price. Unlike ISO and non-qualified options, where we routinely see same-day-sales, it's not uncommon for people to sell recent ESPP shares some time after exercise, and a volatile stock could have a steep change like this. Also, unlike an ISO, an ESPP non-qualifying disposition can result in ordinary income and capital loss.