Hi all,
I am trying to understand how to calculate cost basis for employee share purchase plan scenario:
Let's say every month my employer deducts $200 from my pay check (post tax) towards an employee share purchase plan where for every 2 shares I buy, my company matches it with 1 share.
Let's say over the last year I bought 600 shares at an average cost of $4/share (my total cost $2,400). My company matches that and gives me 300 shares also at an average value of $4/share (their total cost $1,200). I now have a total of 900 shares.
Then let's say my company share price jumps to $5/share and I sell all those 900 shares. My total proceeds would be $4,500 (900 shares x $5/share). What is the cost basis for capital gains tax calculation? Is it:
a) How much I personally paid for the shares: $2400, in which case my capital gains would be $2,100? or
b) How much me and my company paid together: $2400+$1200= $3,600, in which case my capital gains would be $900?
By the way, my company withheld taxes from my W2 when the 300 shares they had bought were "realized". I believe they calculated a taxable income of 300 x $4/share= $1,200 and then withheld a portion of that already from my paycheck (at my income tax rate). So I have already paid income tax on this benefit.
Sorry if my question is dumb, but I just want to make sure I am correctly reporting the cost basis for this.
Thank you for your help
(P.S. I work for a non US company and the share plan manager is also non US, hence I don't have a 1099-B. All $ numbers above are made up)
