Determining stock cost

[drc34718]

Hope everyone is doing well this tax season..I appreciate any time for an answer as I know it is a busy time of year..

I have a client that purchased stock from 8/04 thru 9/06 in an ESOP. Company mathced 50 cents on the dollar..Client sold the stock in late 2006. I have the sales of the individual purchases by date but the question is to the client's basis. According to the client, market price was paid for the stock, but his share was only half the cost due to the match. Does his basis include the company match portion or only his out of pocket.

I am not sure if the company would impute income to him for an ESOP purchase for the amount of the match. I have asked the client about this as the current W-2 does not seem to show any indication of such. Had it indicated, then his cost would be the market value. Assuming there is not W-2 impact, is it correct to assume his cost basis then is the 1/2 value that he actually paid?

Thanks much

RD Cooper

[DaveO]

That's the way I see it.

If the company match was treated as wages then it would add to the basis. If it was treated as an un-taxed fringe benefit then it wouldn't.

[Snaggletooth]

Esop

I believe money in an ESOP is protected from taxes as long as it stays
in the ESOP. Normally, and most often at inception, the employer charges
the employee on his W-2, but I believe after that, increases in market value
and reinvested dividends (if any) are tax free.

When ESOP is expunged, recipient gets a 1099-R. Stock history is not
a good source of information since ESOP is almost always a separate class
of stock without voting rights.

[drc34718]

Thanks for the confirmation..A second opinion never hurts the client where money is involved. This is a great resource to use and appreciate the response..