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patel315
New Member

There's a capital gain on RSUs sold to cover taxes at vesting. All proceeds were withheld to pay tax but 1099b shows cap gain. Do I adjust cost basis to show $0 cap gain?

 
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3 Replies
GeorgeM777
Expert Alumni

There's a capital gain on RSUs sold to cover taxes at vesting. All proceeds were withheld to pay tax but 1099b shows cap gain. Do I adjust cost basis to show $0 cap gain?

No, you will need to pay tax on that capital gain.  When RSUs vest, some of the RSUs are sold to cover the tax withholding.  This "sell to cover" in most instances does not produce a gain or loss because the shares that are sold to cover are sold shortly after the RSUs vest when there is little to no price movement in the underlying stock.  However, in your situation, it appears there was some upward price movement which produced a short-term capital gain.  Thus, report that capital gain on your return.  

 

@patel315 

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patel315
New Member

There's a capital gain on RSUs sold to cover taxes at vesting. All proceeds were withheld to pay tax but 1099b shows cap gain. Do I adjust cost basis to show $0 cap gain?

Thanks for your quick response @GeorgeM777 .

 

Just want to confirm. I never did actually receive that gain. All proceeds (including the minimal gain) went to taxes (reflected on my W2). Seems unfair to pay tax on that "gain" when I didn't actually receive it. 

GeorgeM777
Expert Alumni

There's a capital gain on RSUs sold to cover taxes at vesting. All proceeds were withheld to pay tax but 1099b shows cap gain. Do I adjust cost basis to show $0 cap gain?

That additional information is helpful.  However, the small gain is additional income that was derived from the underlying asset, which in this case was the RSUs.   While you may not have received that small gain "in hand," it was deposited into an account in your name and thus, your deemed to have control over it.  There could be a way for your broker in any future sales of RSUs to not remit any capital gains but for that, you would need to discuss the matter with your broker.  It could be the case that the sold to cover RSUs including the small gain were more than enough to cover the tax liability, in which case you may be entitled for a refund.  

 

@patel315 

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