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Long story...

I participate in my company's stock purchase plan. This plan offers a 15% discount on stock purchases if I make a voluntary after tax payroll deduction throughout the year. The stock is purchased once per year.

I received some stock in October 1998. Like an idiot, after holding the stock for only 8 months (during tax year 99), I transfered 5 shares to my son (age 2). As a result, my next paycheck had an adjustment of about $25 -- which was the difference of the market price and the exercise price of the 5 shares I had given to my son.

Now the question:
1. Does the gift of stock to my son qualify as a "sell" for me?

2. My W2 shows the $25 discount, for the 5 shares, as OTHER income. Is this sufficient for my Taxes, or am I going to have to claim that amount as a GAIN?


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