"Jeff M" <jamacq[at]gmail.com> wrote in message
news:b3f5aa23-0f0e-4b58-a27c-c054849411bd[at]m73g2000hsh.googlegroups.com...
On Jun 30, 4:44 pm, Cal Learner-- MVP <via_newsgr...[at]please.tnxwrote:
- quote -

Cal:

A lot of companies are starting to give restricted stock. The
simplest way to treat these shares in Money is to make them an option
with a zero cost basis. The way a restricted stock works is it is
stock granted to the employee that vests sometime in the future and
has a zero cost basis. So for example if you get 1000 shares of
restricted stock today that vests in two years, then in two years you
take ownership of the shares without any cost. You owe regular income
taxes on the difference between the cost basis ($0) and the value at
vesting. You can then either hold the shares or sell immediately. If
you hold, you then would have a new cost basis in the stock (the
vesting value that you just paid income tax on) and if you sell later,
the change in value is treated as a capital gain.

==================
http://content.members.fidelity.com/...,00.html#grant

Q:
Are there any tax consequences that I need to be aware of if I am granted
Restricted Stock Awards?

A:
Yes. Under normal federal income tax rules, an employee receiving
Restricted Stock Awards is not taxed at the time of the grant (assuming no
election under section 83(b) has been made, as discussed below). Instead,
the employee is taxed at vesting, when the restrictions lapse. The amount
of income subject to tax is the difference between the fair market value
of the grant at the time of vesting minus the amount paid for the grant,
if any.

For grants that pay in actual shares, the employee's holding period begins
at the time of vesting, and the employee's tax basis is equal to the
amount paid for the stock plus the amount included as ordinary
compensation income. Upon a later sale of the shares, assuming the
employee holds the shares as a capital asset, the employee would recognize
capital gain income or loss; whether such capital gain would be short- or
long-term depends on the time between the beginning of the holding period
at vesting and the date of the subsequent sale.
Consult your tax adviser regarding the income tax consequences to you.

http://content.members.fidelity.com/...aq/0,,,00.html

On Jun 30, 4:44*pm, Cal Learner-- MVP <via_newsgr...[at]please.tnxwrote:
- quote -

Cal:

A lot of companies are starting to give restricted stock. The
simplest way to treat these shares in Money is to make them an option
with a zero cost basis. The way a restricted stock works is it is
stock granted to the employee that vests sometime in the future and
has a zero cost basis. So for example if you get 1000 shares of
restricted stock today that vests in two years, then in two years you
take ownership of the shares without any cost. You owe regular income
taxes on the difference between the cost basis ($0) and the value at
vesting. You can then either hold the shares or sell immediately. If
you hold, you then would have a new cost basis in the stock (the
vesting value that you just paid income tax on) and if you sell later,
the change in value is treated as a capital gain.

I've been watching this thread because I also entered my restricted
stock as a zero-basis option.

In microsoft.public.money, - Bobb - wrote:

- quote -

That is my understanding. Basis equals $2000 I would think.

- quote -

Even if the value of the options is considered zero, the basis of
the stock would at least be the exercise price. I suspect more.

- quote -

None of those options were exercised, if I understood correctly. So
I don't think there would be a taxable event.


- quote -

Congress as interpreted by the IRS. I don't know the rules, but I
had the feeling that for a "non-qualified" (non-ISO) employee
option, earned income was recognized at the time of the exercise for
the amount of discount on the stock received (even if that stock was
instantly sold). For "qualified" options the rules changed somewhat,
but there was a non-zero exercise price. So this would not apply.
ISO (qualified) options can even have a different basis for AMT
purposed.

So I doubt that stock from an employee option should properly have
zero basis, zero exercise price and no regular income tax to be
applied. Good question for misc.taxes.moderated.

A related employee incentive thing is the restricted stock. I don't
feel confident of how those are taxed. I doubt that they would
totally be treated as CG.

"Cal Learner-- MVP" <via_newsgroup[at]please.tnx> wrote in message
news:ge8i645qvvis20q0h93bjr6f4md5ej5jsd[at]4ax.com...
- quote -

If cost basis of ~ say " stock options that you were given when hired"
had SOME value at that time - even if not traded on the open market,
that's fine, but trying to calculate that I think is his issue. If they
gave him 200 shares and they are valued at 10, and he sells that day, then
his cost is $2000 and sale of $2000 = no gain - it's not a cap gain, all
is INCOME and they would add to W-2 , No ?

Another example ( for options) would be:
If when you hired on they couldn't give you more money for the position
but COULD give you options to buy the company stock at $6 / share( which
is currently trading at 10) would have a value of $4. Or if you were given
the shares by the company it would be $10 per share. BUT if got options to
buy the stock within 3 years [at] 15 and there are no public options traded,
then how would he calculate the cost. This user is deciding that it is $0
and Money shouldn't mind if he WANTS to have a $0 cost basis, right ?
He'll pay more in taxes , but how else to value the options?

BTW one example: one of my high tech customers in ~2000 went public.
Current employees got options to buy stock at $20/share within 24 months.
Stock went public at $10 and went up to $11 before then spiraling downward
in the tech bubble. While having a coffee in cafeteria about 6 months
later I was making small talk with a few employees ( new hires during the
downward spiral) and THEY got options to buy the stock at $8 ( it was then
$4). I could tell that folks nearby that overheard that were VERY upset
...... These folks never had a value attached to them when they got them
since that option didn't exist on the open market.

Should the first group pay taxes on the value of "whatever the option
would have traded on the open market for" ? when they got their option to
buy at $20 ?
and then take a loss when the company went out of business ?

I think most did NOT declare anything at first and IF they DID ever get
lucky enough to execute , would then pay tax as if cost basis was zero.
( like cg ?)

Per IRS:
" Basis. Your basis in stock or stock rights received in a taxable
distribution is their fair market value WHEN distributed. "
Who's to decide - the company ? or the individual ?

In microsoft.public.money, - Bobb - wrote:

- quote -

If you do a Buy or an AddShares, $0 is no problem. The people with
the problem had some kind of zero basis stock due to employee
options. Sounds strange to me. It is not clear to me that this is
allowed in tax law. It sounds as if it could be a way to get CG
treatment for earnings.

- quote -

no pun intended? ;-)

Glad it worked out.
You would think that a cost basis of zero would be allowed - why not ? But
rather than NOT let you do it, Money should warn you and ask to confirm.
(apparently the guy who decided that it was not an option didn't speak to
the person that wrote the interface - I find that a lot in Money).

"cg" <cg[at]discussions.microsoft.com> wrote in message
news:AE1B4ED8-1068-4676-9380-7598B68D8FD4[at]microsoft.com...
- quote -

Based on something you said about .01 I experimented and finally figured it
out. The answer is that MONEY will not accept a cost basis of zero as you
thought, so I entered .00001 and now all the reporting is correct. I think it
is because of the way MONEY calculates percentages in the Portfolio. I had to
experiment a lot starting with .01 until I got to .00001 before it calculated
everything correctly. It sure would have been nice if MONEY explained this
somewhere in the program!!


"cg" wrote:

- quote -

There was no decimal error. The correct calculation is: SP was $33847-0
(cost)=$33847 gain
Somehow MONEY calculated it incorrectly as follows:
SP $33847-$37161 (cost MONEY assigned)=$ $3314 loss

I entered the cost as 0 and MONEY changed the basis even though the cost
they assigned did not match any of the lots I have in MONEY. See earlier
information for exactly how I entered both the cost and sale of this lot.


"- Bobb -" wrote:

- quote -

"cg" <cg[at]discussions.microsoft.com> wrote in message
news:ACEB7833-33C3-4A15-804B-2B3BE8144924[at]microsoft.com...
- quote -

I'm sure the IRS won't mind you taking a loss.
Seriously though, I see 3.30 per share and 3314 loss - did you slip a
decimal somewhere ?
Rather than $0 for price , did you maybe you .01 per share ?
I seem to remember trying to use $0 for cost and it wouldn't accept it so
I used .01 or .001 and had similar issues ( years later).

I just sold some stock for $33847 which I held with a zero cost basis
(originally these were options converted to stock at zero basis). When I
chose the lots to sell I indicated the ones with the zero basis and MONEY
showed them as such, however, when I looked at the Capital Gains Report, they
showed up as a cost of $37161 for a loss of $3314 instead of a capital gain
of $33847. I have no idea where the program got a cost per share of $3.30 as
none of my lots of this stock are at that cost. Anyone know why this
happened. I went back and tried to reallocate the shares but again it showed
the basis correctly as zero on the sale but recorded it incorrectly in the
report.