joeu2004[at]hotmail.com (Joe User) wrote:
- quote -

As a beacon to others, it's worth noting the problem case of
stock which rises in price between grant and purchase, but
falls back between purchase and sale. It's perfectly
possible with this tax treatment to register a real loss on
the stock, yet pay tax on a theoretical paper gain; this tax
may be recoverable, but could take years.

For example, Joe buys 1000 shares, currently priced at $50,
for $10 each, then sells a month later for $20 per share.
His actual gain is $10,000. However, his taxable income is
$40,000, less $3,000 allow- able loss write off. The
federal tax on this amount could readily exceed the actual
gain.

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andygreen[at]optonline.net (Andy Green) wrote:

- quote -

In a nutshell, yes. More specifically, you record 6928.64
as the net sales price in column d and 7072.20 as the cost
in column e. This is recorded as short-term loss.

- quote -

Of course, 77.32 * 90 = 6958.80, not 6928.64. What you mean
is: 6928.64 is the net sales price after commission and
fees.

- quote -

Not exactly. You are "taxed" on bonus income of 1900.80
less short-term loss of 143.56 -- a net income of 1757.24,
which is exactly what you expected.

What you mean is: the entire 1900.80 is treated as bonus
income. Yes, that is the "penalty" for the disqualifying
sale.

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andygreen[at]optonline.net (Andy Green) writes:

- quote -

Ok, so it's a disqualifying disposition, which
simplifies things. Your basis in the stock is what you
actually paid for it plus the wage income recognized
at the sale. So, your basis in the stock is:
$5171.40 + $1900.80 = $7,072.20

You sold it for $6,928.64, which means you'll
have a capital gain of:
$6,928.64 - $7,072.20 = -$143.56, i.e. a loss of $143.56

- quote -

1099-B forms are always issued for the amount of the sales.
It's your job to compute and report basis (and thus determine
actual gain or loss).

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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andygreen[at]optonline.net (Andy Green) writes:

- quote -

The amount of cash you put in plus the amount deemed to be
wages equals your basis. The rest is Schedule D math.

Phil Marti
Topeka, KS

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I participated in my employers ESPP. I want to report it
correctly and it's a bit confusing. The Market value is
determined to be 78.58 per share. With my 15 % discount that
comes to 57.46 cents a share. I have 5171.40 available to
purchase stock so 5171.40/57.46 = 90 shares. My discount is
21.12(per share) * 90 = 1900.80. I sell the stock as soon as
it is available in my account 3 days later at 77.32 per
share * 90 = 6928.64. Then I am notified that I will be
taxed on my next paycheck for the amount of 1900.80(the
discount). I am taxed on the next paycheck for the 1900.80
as ordinary income and all taxes are withheld from that
amount. Even though my gain was 6928.64-5171.40 = 1757.24, I
am still taxed on the 1900.80. Now I get my 1099-B for the
amount of 6928.64.

So do multiply 78.58 * 90= 7072.20(as purchase price) then
subtract my 6928.64(proceeds) and report this on my schedule
(d) as a loss? - Any help appreciated.

Thanks to all - Andy

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