The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Taxes on '97 Stock Option||Date: 4/8/1998 10:02 AM|
|Author: TMFTaxes||Number: 3330 of 121095|
[[In '97 I exercised some stock options (non-qualified stock option plan) which I had received from
my employer. Since I sold the same day as I exercised the options, it was treated as regular
income. The gross proceeds were added to my year-to-date income; federal income taxes and
FICA taxes were also withheld and their amounts added to year-to-date totals. I received a
one-page statement detailing the numbers in the transaction.
My W-2 for '97 includes this option money in the "Wages" amount; however, I also received a
1099-B form which shows the total sales price of the shares, and shows zero federal income tax
withheld -- no other amounts.
It seems clear to me that the money was treated as regular income and included in my W-2 amount.
What I don't understand, then, is why did I get a 1099-B form to file with my taxes? Can anyone
explain how this form is supposed to be used to report the transaction without the IRS considering
it additional capital gains income?]]
KAT in Chicagoland has posted a number of detailed responses on this issue. You might want to go back and read 'em.
But the short answer is that your basis in the shares of stock would be the amount that you paid for them (via exercise) PLUS the amount of income that was included in your W-2 form.
So when you report the stock sale on your Sch D, you'll find that your gain/loss on the sale of the shares will be very small (if there is any at all). But be sure that you DO report the sale of the shares on your Sch D.
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