RSU sold to pay for taxes are showing for capital gain

[khetank]

Hi,

I had 3 transactions in 2024 where part of my vested RSU stocks were sold to pay Federal and State tax by my employer / Etrade. All these sell transactions happened before or on the same date the RSU were vested in my account. As per my understanding these sell transactions should not be considered as capital gain. However turbox tax is considering them as capital gain and calculating taxes that I need to pay for the capital gain.

Can you help and clarify

KV

[DianeW777]

They are a capital gain. There is no double taxation because you will adjust your cost basis for the sales. 

• The buy and sell will be basically the same dollar amounts due to the sale occurring when you were awarded the shares. (Income reported on your W-2, as well as federal withholding paid for you).  
• The income reported in you W-2 is the amount that becomes your cost basis (and any money you might have paid as a discounted amount for the shares).
  • Example Scenario: 10 shares sold will have a $100 (assumes $10 per share) cost basis for you and same sales price (amount awarded plus any discount cost to you, if any)  the balance, $200, will be the cost basis of the ones you still hold (assumes a total of 30 shares)
  • Follow the steps in this link to enter your sale: Where do I enter a 1099-B?

[khetank]

Hi,

Thanks for the reply.

What I understood from your reply is for the 3 sale transaction that happened 1 week prior to my investment dates, the sale price and cost basis will be identical so I do not pay any capital gain. The company already showed the cost value of the remaining shares in my W2 s income.

Kris 

[ThomasM125]

Your understanding is correct for the most part. Assuming the shares sold to pay taxes were sold at the same time they vested, the sale price and cost would be the same. It is possible that were sold after the time they vested, so there may be some capital gain or loss, but it is typically minimal. Assuming you didn't pay anything for the restricted stock units (RSU's), their cost would be the income reported for them on your W-2 form. You can take that cost and divide it by the number of shares acquired to get the cost per share. You can multiply the cost per share times the number of shares sold to pay the taxes to determine the cost of the shares sold. That is the cost you should enter when you report the investment sale in TurboTax.