How to report "Exercise of Incentive Stock Options"

[AZ-Tax]

I have a W-2 sitting in front of me that is reporting in box 14 Other ISO

That's for an NSO. For ISO included in box 1, you'll likely need paystub to determine.

I have a W-2 sitting in front of me that is reporting in box 14 Other ISO. TP looked at his paystub and the section of the W-2 that itemizes breakdowns deductions etc. and couldn't tell. TP was to call his HR dept. TP employed with a large publicly traded Co.

[BP.]

W-2 box 14

That's for an NSO. For ISO included in box 1, you'll likely need paystub to determine.

[AZ-Tax]

These can be a nightmare

If the ISO appeared on the W-2 box 14, look at the itemized section of the W-2 to see if the ISO was included in box 1. If the itemized section does specify, contact HR of the company.

[BP.]

In all likelihood, the employee already paid (regular) income tax on the 2013 income that resulted when the stock was bought at a discount

Kimberlyjo posted this is an ISO.

Pub 525, ISO:
Exercise of option. If you exercise a statutory stock option, do not include any amount in income when you exercise the option.

I wouldn't expect compensation to be realized at date of exercise, rather at date of sale.

[FEDUKE404]

Simple answer

Assuming the disposition WAS during 2014:

There have been several recent related discussions on these boards. Suggest you search for the topic.

In the simplest of terms, the taxable capital gain is likely the difference between the sale price and the FMV at time of exercise. The actual "cost" is not relevant except for tracking purposes. In all likelihood, the employee already paid (regular) income tax on the 2013 income that resulted when the stock was bought at a discount, hence raising the cost basis. Did you prepare the 2013 income tax return? ? ?

FE

[BP.]

Need more info

option exercised, 12-27-13

Since we're into 2014 returns now, was the date of sale in 2014?

Look at Pub 525, and TTB 6-2. Check the paystub for the period when the sale occurred for anything included as compensation.

[kimberlyjo]

Have Form 3921, option granted, 4-24-12
option exercised, 12-27-13
Cost of shares $13,358
FMV of shares when exercised is $28,451

Also have Form 1099-B with proceeds of $44,505

How it is this transaction reported ?

Thank you so very much.