Hi Dave,
Thanks for your reply. I would like to give you a more specific example to explain.
As of, Jan 1, 2006 the employer changed the ESPP as follows. the plan provides for a quarterly purchase period. The price at which you are able to purchase the shares is based on the actual share price at the end of a quarterly purchase period less a discount of 5%.
Quarterly period 4/3/2006 - 6/30/2006
4/3/2006 grant date the FMV/share is $70.60. Price/share as if Exercise on grant date is $67.07
6/30/2006 exercise date the FMV/share is $59.82. Price/share on exercise date is $56.82 (Which is the actual exercise price). All the sales were qualifying dispositions.
Entering the information using the Turbotax "we'll walk you through entering the rest of your sales info"
Turbotax concludes as follows:
a) FMV on date of purchase less exercise price $3.00
b) Discount as if Exercise on Grant date $3.53
c) Net Sales proceed less exercise price paid $118.64 (sale price per share was $175.457)
d) Lesser of (b) or (c) $ 3.53
e) Compensation income is (a) if disqualifying and (d) if qualifying $3.53
I don't understand this result. Is this correct?
Thanks, Lina
