- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Get your taxes done using TurboTax
NQSO Box 1 includes the income from the exercise, the difference between the FMV at the time of exercise and what you paid for the stock.
with regard to your W-2, this income is grossed up for social security, medicare and withholding taxes so the increase for box 1 will be more than 12v. box 3 and 5 also include this income up to the max for social security taxes and all of it for medicare taxes. since 12V only includes the income element you must add what you paid, if anything, for the option/exercise. this total is your basis for determining gain/loss on sale. if you sold at the time of the exercise, in theory should be no gain or loss. however, fluctuations in price when selling and any costs such as brokerage and security sales fees likely result in a small gain or loss per share. .
***********************************************
ESOP
the initial cost basis of an employer’s security in the ESOP is determined by the value of the stock when it was deposited into the ESOP trust.
Here are some key points:
-
Cash Distribution: If an ESOP distribution is received as cash (without being rolled over into an individual retirement account or another qualified plan), it is subject to ordinary income tax rates for the tax year in which it is received.
-
Stock Distribution: When a distribution is received as company shares, which the participant subsequently sells back to the company, the cost basis of those shares becomes taxable as ordinary income.
-
Net Unrealized Appreciation (NUA): If the current fair market value of the stock exceeds its cost basis, this difference is known as NUA. The NUA portion is taxed at the long-term capital gains rate. Importantly, this taxation occurs at the time of distribution, regardless of how long the distributed stock was held in the plan before the distribution.
thus the 1099-B should reflect the proper gain/loss on the sale of these shares,