My apologies for not fully understanding the question. In the case of an exchange into a qualified tax-deferred plan, the bargain element will be still be considered ordinary income at the time of the exchange.
You will report the ordinary income from the bargain element based on the value at the time of the exchange (this portion of the transaction will be calculated the same as if you sold the stock). Your company may report this on your W-2 for you. If it is reported on your W-2, you will see an entry in Box 14. If you're not sure if it is included, contact your payroll department.
If your company does not report the income on your W-2 you will report as ordinary income (Line 7 of Form 1040) the lesser of:
- The gross sales price (exchange value) minus the actual discounted price paid per share less any sales commission.
- The per-share company discount times the number of shares.
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