You calculate your cost basis by multiplying the number of shares you purchased times the exercise price and then add your bargain element to that number. The bargain element is the discount you received when you purchased your shares. The bargain element is generally 15%, but your company may have a different bargain element therefore, you might want to verify that discount with them.
Your right to purchase shares in an ESPP is governed by your company. Generally, companies allow purchases to occur are regular intervals, i.e., quarterly; however, here again you might want to verify this information with your company. Knowing when your purchases occurred can give you at least some insight into what you paid for the shares you purchased. Form 3922 would be helpful here and you may want to request a copy of this form from your company.
Your 1099-B may also contain your purchase price(s) and if Morgan Stanley has your purchase price and cost basis information, such information should be on your 1099-B.
If you did not sell any ESPP shares, then there is nothing to report on your return. Therefore, the information contained herein assumes you sold shares and have a gain/loss to report. Any bargain element you received would already be reported on your W-2, thus, there is no need to separately report the bargain element if you did not sell any ESPP shares.
In TurboTax you begin the process of entering your ESPP sales information by selecting Investments and Savings (TurboTax online) under the Your income and expenses screen, or by selecting Investment Income (TurboTax CD/download), under the Wages & Income tab.
Knowing whether your sales can be characterized as qualifying dispositions or non-qualifying dispositions is important because it does affect the amount of tax you pay. Determining what type of disposition you have is predicated on the length of time you held your shares but also the time period measured from when you were given the option to purchase the shares (referred to as the grant date).
The attached TurboTax article provides useful information regarding the two types of dispositions and also how to calculate your gain/loss.
Employee Stock Purchase Plans
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