"CB" <temp1[at]tomochka.com> writes:

- quote -

No, it probably wouldn't look like that. The gazillion
Sched D forms filed every year don't have anything attached
to document basis and the IRS doesn't bat an eye.

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

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CB wrote:

- quote -

The following site at turbotax.com explains how to handle
ESPP qualifying and disqualifying transactions:
http://www.turbotax.com/articles/Emp...hasePlans.html

The only element missing from the explanation is where to
put the ordinary income component on the 1040 if not
included on your W-2. Answer: It goes on Line 7, Wages.

--
Alan
http://taxtopics.net

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MTW wrote:
- quote -

OK, I'll admit to a bit of exaggeration. It was that many
pages, but 90% of them were simply transaction/invoices from
the broker and company showing the basis and taxes withheld
where applicable. The actual 4 explanations were a paragraph
each pointing to those sheets. I don't see how I could have
avoided adding those sheets even if I had filed all on
Sched. D, since it would simply look like made up numbers to
an agent. Perhaps it would have avoided the letter if I'd
done that in the first place (albeit see previous post
pointing to IRS FAQ that isn't even clear on that point),
but at this point they are looking at it more closely.

Cheers, C

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"CB" <temp1[at]tomochka.com> writes:

- quote -

You don't have to do anything special. Your employer will
report the wage income recognized by a ESPP disqualifying
disposition on your W-2 in box 1. In other words, the Box 1
wages will already include the disposition "wages" so you
need do nothing special to report them.

And that URL you provides leads to something that is not
particularly well-written and oversimplified. There's a
world of relevant details behind that "generally" in the
first line of the answer.

Anyhow, you need to find out from your employer how much
wage income you recognized on the disqualifying disposition.
Add that to your actual purchase price to get your basis in
the stock you sold. Subtract that from the sales proceeds to
get your capital gain or loss. All that goes on Schedule D.

Regardless of any "guidelines", it is a practical fact that
if the IRS gets a 1099-B that you don't account for on a
Sched D, it'll treat the sale as having zero basis and will
take the entire sales proceeds as income.

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

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At least with regard to stock acquired from a company stock
purchase plan and disposed of in a disqualifying
disposition, IRS guidance doesn't line up with your rule of
thumb regarding 1099-Bs:
http://www.irs.gov/faqs/faq-kw183.html On the other hand,
they don't exactly tell you what/how you should account for
this "compensation income" on one's return, though it
clearly implies that in this case one doesn't use Sched. D.

Perhaps the rule of thumb should be qualified to say it
can't hurt to put everything on Sched. D, although they also
pegged me for my one qualifying disposition that I DID put
on Sched. D. Go figger.

At least I'm glad to see the confusion is not totally
confined to my brain. [And Phil, I didn't actually
"ignore" the 1099-B, I just didn't know how to properly
process it].

Cheers,

Casey

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I may have made a mistake in calling the 1099 a 1099-B. I
don't have the docs here with me at the moment. It didn't
occur to me that I would file what is essentially a
"frivolous" entry on Sched. D, showing a loss equal to the
broker fee (less than a dollar in at least two cases). That
would seem to require just as much explanation (pointing
back to the W-2 amounts, cryptically labeled) as I have
already done. I suppose, though that their letter was kicked
off by a computer and repeating the information on the
Sched. D would have avoided that. Although, in one item,
shares acquired via the ESPP and held for more than two
years, were also listed in the letter and those I DID put on
Sched. D and correctly I might add, so there you go.

Thanks for the advice.

- C

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Arthur Kamlet wrote:

- quote -

I "second" your suggestion (and you beat me to it <grin> ). I
had the same reaction - that 15 pages of explanation could
likely cause more problems than it solves. This is an
example of where seeking professional advice BEFORE
responding to the IRS would have been advisable.

MTW

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CB wrote:

- quote -

Without seeing your return, I am guessing that you failed to
report the sale of securities on Form 1040 Schedule D and
the IRS is now using the gross proceeds of the sale to
compute your tax.

Any time you sell capital assets, you must report the sale.
The amount on your W-2 represents the ordinary gain to be
taxed at ordinary tax rates. You need to account for the
capital gain or loss. The best way to answer the IRS would
have been to file an amended return with the Schedule D
attached. Your cost basis in the shares you sold are what
you actually paid for the shares plus the amount reflected
on your W-2 as ordinary income.

--
Alan
http://taxtopics.net

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"CB" <temp1[at]tomochka.com> wrote:

- quote -

A no change letter. You (and lurkers) can save a lot of
trouble in the future by not ignoring 1099-B's.

--
Phil Marti
Clarksburg, MD

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CB wrote:

- quote -

Okay, what you should have done, was report the actual sale
(same day sale) on a schedule d, short term capital gain.
And actually, when you look at broker's statement, you'll
see he made his commission, that's for sure! And that
commission would therefore result on a loss on schedule d.

Not sure how IRS will react to your voluminous reply, but
this is the simple solution.

ChEAr$,
Harlan Lunsford, EA n lA

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CB <temp1[at]tomochka.com> wrote:

- quote -

Rule of thumb: If you get a 1099-B then you have to file a
Schedule D.

So instead of writing long explanations, and coming up with
spreadsheets, most of all of which might be kicked back to
you, just file the schedule D as you should have, to begin
with.

The stock option part is easy -- your cost is market price
on date of exercise, and sales price is shown in the 1099B.
Chance are if you did a same day exercise and sale you have
a slight loss due to brokers fee.

The ESPP cost depends on whether you sold at a profit or
loss and whether you had a disqualifying disposition. Look
at your plan documents

So file the schedule D, be sure you understand what goes on
the schedule D or seek local professional tax advice.

Your proposed solution is far, far too much work and will
probably end up with a request for you to file the return
correctly, namely with a schedule D.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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For the first time in my 30+ years as a taxpayer I received
an audit notice (for my 2003 return), more specifically a
letter audit (no office visit requested). It was not a great
way to start my weekend, getting a letter saying I owed them
about $13K in taxes, penalties and interest! But, as I
read on I realized all four items they were contesting were
relatively easy to explain and document.

They all derived from sales of my employer's stock via their
employee stock purchase plan or non-qualified options I
exercised. In the former case, the profit is reported on my
W-2 as ordinary income, and in the latter full fed/state
witholding is made and the amount of profit is reported on
my W-2. Unfortunately, the brokerage simple reports a 1099-B
of the gross proceeds, which is what the IRS is using to
base their claim (not having enough info to determine cost
basis).

Naively, I didn't supply any extra documentation with my
return supporting the cost basis, figuring it all got worked
out somehow since some withholding was made and the amounts
are on my W-2, plus I wanted to file electronically. My bad
as my teenage son would say!

So, with about 3 hours work I supplied about 15 pages of
supporting documentation along with an explanation of each
item and a summary spreadsheet and mailed that off in
response, certified return receipt (all within about 3 days
of receiving the notice).

What can I expect now? It *seems* straightforward to me and
my cover letter was cooperative and polite, and I'd expect a
reasonable person to quickly see that all was computed
correctly (well, there is about 50 bucks total difference on
$42K gross that I couldn't account for...) and close the
audit promptly. More naivete?

How long should I expect to receive a response one way or
another? What are the odds they will now check other years
for this apparent discrepancy? What are my options if they
insist on their point of view? Do I need to do anything with
respect to my state return (OR) now or do they wait for the
result of the audit?

Believe me, in the future I will pre-document these kinds of
items when I next file a return. Better than risking a
coronary! :^)

TIA,

Casey

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