Code "v" On W-2

[peggysioux]

Is the figure marked with a "V" on a W-2 representing the amount of the difference between the FMV of the stock and the exercise price (the taxable portion of the non-qualified stock option)? I need clarification as I have two clients with W-2's marked with the V. The first client shows $3,000 under code V and also has documentation stating the the basis in client's stock is $4800 and the sale price was $4800 with an expense of $9, so client has loss on schedule D of $9.

However I have a second client that shows $28,000 marked as "V", however his total wages shows only $20,000. This client has no past documentation. He hasn't filed in three years and I received W-2 information from the IRS. I am confused in that if the V portion represents the difference between the FMV and the exercise price, wouldn't his wages also need to reflect $28,000. Any help would be appreciated.

[OldJack]

The first client W2 is correct and he obviously sold the stock the same day he exercised the option so the only thing reported is 1040 Sch-D sale $4800, cost $4,809 with short-term capital loss of $9.

The second client may have simply received the certificates of stock and has not sold them. Like you I don't really understand why the value is more than the taxable gross income.

[Dervis]

Code V

Here are the instructions for filling out the W2 regarding code V:

"Code V—Income from the exercise of nonstatutory stock option(s). Show the spread (that is, the fair market value of stock over the exercise price of option(s) granted to your employee with respect to that stock) from your employee's (or former employee's) exercise of nonstatutory stock option(s). Include this amount in boxes 1, 3 (up to the social security wage base), and 5."

Box 1 is supposed to include the amount coded as V in box 12. So the W2 must be wrong and needs to be corrected.

[Mike Mac]

Code V

Before this last tax season, I never saw a W-2 with a code "V" nor recall any questions on this board regarding these stock options. Did an accounting standard change in 2006 that these seem to be more numerous?

[OldJack]

>>Did an accounting standard change in 2006 that these seem to be more numerous?<<

Not that I can recall off-hand. I have been having a few of these for years.

[JohnH]

Code V was optional, but

it became mandatory beginning with CY 2003.

[DonPriebe]

It appears that the 1099-B is now optional

If you read the instructions for the 1099-B, it is no longer required for same day exercise of non-statutory options if certain [common] conditions are met.

[peggysioux]

Code V on W-2

Employer has closed their doors and employee is unable to go to employer to determine why the code V of 28,000 is more than box 1 of W-2 ($20,000). Based on the information that the IRS supplied to me, there was not a 1099-B filed for the sale of non-qualified stock option. Client did tell me that he remembers getting $1000 in 2000 for the sale of his stock; but does not have any other documentation. So, my question is this - should I file client's 2005 tax return based on the wages in box 1 and being there was no 1099-B filed, do nothing with the stock option? Franchise Tax Board has sent client letter regarding 2005 tax return and has begun to attach wages, so would like to get handled as quickly as possible. Would appreciate any input!!!

Thanks!

[Kram BergGold]

Maybe

It seems you are assuming he did no work and had no real wages.
Could the $20,000 represent real earnings so the W-2 should read $48,000 in box 1?

[peggysioux]

Not assuming

that taxpayer had no wages, but there seems to be an error on the stock option, but without any details, thought that tax return should be filed based on the wages posted on W-2 of $20,000. I would like to know how other tax preparers would handle with the limited information given and company now closed.

[Dervis]

Filing

that taxpayer had no wages, but there seems to be an error on the stock option, but without any details, thought that tax return should be filed based on the wages posted on W-2 of $20,000. I would like to know how other tax preparers would handle with the limited information given and company now closed.

Unless I had information from the client that contradicted it, I would file with the information I obtained from the IRS. I would use box 1 wages and not file a Schedule D.