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Author: CheetahChrome One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: W-2 Entries for Same Day Sales Date: 2/1/2000 5:17 PM
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Hello,

In 1999 I exercised & sold (same day sale) a ton of options from the company at which I used to work. The options included both ISOs & NQSOs.

I'm trying to understand what amounts will show up on my W-2. As I understand it, since these were disqualifying dispositions, the "bargain elements" should show up in "Wages, tips, ..." on my W-2.

Is this correct?

Now, stick with me here ...

Since these were all same day sales, wouldn't the "bargain element" for each sale be the same as my "profit" on each sale?

This seems intuitive to me, but maybe I'm misunderstanding something. The reason I'm unsure is because my calculations of my profit on these sales is MUCH larger than the amount on my W-2.

I can understand there might be some difference in amounts, since the bargain elements might be calculated using the closing price of the stock, while my calculations were done using the actual sale prices for each transaction.

What am I missing?

Cheetah
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 26963 of 121061
Subject: Re: W-2 Entries for Same Day Sales Date: 2/3/2000 1:28 PM
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<<In 1999 I exercised & sold (same day sale) a ton of options from the company at which I used to work. The options included both ISOs & NQSOs.>>

Which both have different tax treatments. So you really have to separate the two for tax purposes.

<<I'm trying to understand what amounts will show up on my W-2. As I understand it, since these were disqualifying dispositions, the "bargain elements" should show up in "Wages, tips, ..." on my W-2.>>

That should be correct.

<<Since these were all same day sales, wouldn't the "bargain element" for each sale be the same as my "profit" on each sale?>>

I'm not sure what this means exactly. But if what you are asking: isn't all of the gain or loss on the sale of the stock included in my W-2 income...I would say yes (save for sales commissions paid and any minor fluctions in the stock). The "bargain" element was included in your W-2, and therefore the gain/loss on the actual sale of the stock will be virtually nill.

<<This seems intuitive to me, but maybe I'm misunderstanding something. The reason I'm unsure is because my calculations of my profit on these sales is MUCH larger than the amount on my W-2.>>

Then it's possible that some of the ISOs that you sold were not disqualifying? The only answer to the question would be with your payroll and benefits people. They should be able to detail the information that comprised your W-2 earnings.

But I think that you've got the theory down correctly.

<<What am I missing?>>

I'm not sure that you're missing anything...other than the information you need to determine how your W-2 wages were created.

For additional information on how options work, see the Fairmark (http://www.fairmark.com) tax site. Best place on the web to understand options as compensation. Additionally, Kaye Thomas (the owner of this site) now has a book in publication entitled "Consider Your Options"...which should be required reading for ANYBODY who is receiving options as compensation. Order it at his web site or Amazon.com

TMF Taxes
Roy



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