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I sold shares purchased in my Employee Stock Purchase Plan and am trying to understand what portion is reported as normal income and what to report as my cost basis.

Here is an example of the relevant data using 1 share:

The begining option date: 6/1/96
The ending period date: 12/1/96 (purchase date)
Date stock sold: 6/11/98
Shares sold: 1
Beginning date FMV: 51.250
Ending (Pruchase) date FMV: 36.812
Purchase Price: 31.500
Total Proceeds from sale: 56.52

Now, according to TurboTax, I have a gain of $25.02, of which $19.50 is reported as normal income. My capital gain amount is $5.52.

I can't figure out how TurboTax is comming out with this answer. Where is the $19.50 normal income figure comming from? I thought the difference between the purchase price and the FMV on date of purchase is what should be normal income (36.812 - 31.50 = 5.312).

Is TurboTax wrong or an I missing something?
Please help.


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