Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Next Thread
Author: dklions Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121592  
Subject: Options question Date: 2/10/2000 12:26 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Hello everybody,
My wife works for the big bank. Last year she exercised her options that were given to her ( i.e. she bought and sold at the same time ). It went through payroll, meaning that the bank deducted all taxes,
and W2, we received, reflects this fact correctly.

However later we've got a letter from the Brokerage firm through which Bank was doing business. In this letter only gross gain is reflected.
Question: what to do with this letter? How do we record it in our tax forms? (we've already got the same information from the bank's W2 )

Thanks
Print the post Back To Top
Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28183 of 121592
Subject: Re: Options question Date: 2/10/2000 2:11 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
<< My wife works for the big bank. Last year she exercised her options that were given to her ( i.e. she bought and sold at the same time ). It went through payroll, meaning that the bank deducted all taxes,
and W2, we received, reflects this fact correctly.

However later we've got a letter from the Brokerage firm through which Bank was doing business. In this letter only gross gain is reflected.
Question: what to do with this letter? How do we record it in our tax forms? (we've already got the same information from the bank's W2 ) >>

Correct me if I'm wrong, but the letter from the brokerage is a substitute Form 1099-B, right? You report the sales price, basis, and gain or loss on Schedule D, line 1. Since the amounts deemed to be wages and included on the W-2 are part of the basis, the net gain or loss should be minimal.

Phil Marti
Tax Preparer

Print the post Back To Top
Author: mathetes Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28409 of 121592
Subject: Re: Options question Date: 2/12/2000 10:04 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
dklions However later we've got a letter from the Brokerage firm through which Bank was doing business. In this letter only gross gain is reflected. Question: what to do with this letter? How do we record it in our tax forms? (we've already got the same information from the bank's W2 )

You've already gotten one answer that correctly differentiates between what it reported on W-2 and what on Sched D...... I fleshed out a little bit more of the difference in the following message replying to an earlier message.

http://boards.fool.com/Message.asp?id=1040014008312002&sort=id

You also might want to read on the topic at www.fairmark.com

The basic point is that your W-2 shows the difference between the option price and the market price that the Bank used in calculating regular income. This is the so-called "bargain element" in stock options.

The bank may well have used the average of the day's high and low as the market price in their calculation. You actually sold it, most likely, a few cents above or below that average price. On the Schedule D your basis will be the average market price figure the bank used; your sale price will be the actual sales price.

You most likely did this with, say, 100 shares, so the short term gain or loss will be negligible and you might wonder why the IRS bothers. But they have to be ready for the Bank president, who may exercise thousands of options.... in whose case even these few pennies of difference can add up to thousands of dollars of short term (one day!) gain or loss.

mathetes

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Next Thread
Advertisement