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Level 1
posted May 9, 2021 5:37:23 PM

Cost basis of my early exercised stock options

So I early exercised my company stock options a few years ago and I paid tax as part of that process. Now I sold the stock and have to do my tax return. Say, when I was early exercising, the strike price was $1, FMV was $5, and I had to pay tax for the $4 diff. Then I sold the stocks at $10, do I have to pay tax for the $9 difference or $5?

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1 Best answer
Expert Alumni
May 9, 2021 6:22:20 PM

Yes, just edit (change) the cost basis that was reported by the broker from  $1 to $5. This is very common.

3 Replies
Expert Alumni
May 9, 2021 6:13:53 PM

You would owe tax on the $5 difference. You already paid $1 for the stock and tax on the $4 discount, so your cost basis is $5.

Level 1
May 9, 2021 6:16:27 PM

Thanks for your answer, Todd! That's what I thought as well. I think my broker marked it wrong though in my 1099-B with a cost basis of $1. Any way to reflect the correct cost in Turbo Tax? Thanks.

Expert Alumni
May 9, 2021 6:22:20 PM

Yes, just edit (change) the cost basis that was reported by the broker from  $1 to $5. This is very common.