The noncovered transactions are most likely the ESPP stock, Noncovered cost basis means that your brokerage firm is NOT responsible for reporting cost basis information to the IRS and will only report the sales information. For noncovered securities, you are responsible for reporting cost basis information to the IRS when you file your taxes.
When you sell the stock, the discount that you received when you bought the stock is generally considered additional compensation to you, so you have to pay taxes on it as regular income.
- If you hold the stock for a year or less before you sell it, any gains will be considered compensation and taxed as such.
- If you hold the shares for more than one year, any profit will be taxed at the usually lower capital gains
This is the reason we need the 3922. This form will have the information needed so you report it accurately. I advise to contact Morgan Stanley directly so they can send you this form.
