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Level 2
posted Jun 7, 2019 4:24:42 PM

What code do I need to use to show the adjustment of cost basis to 1099-B for employee stock sales?

When entering sales of employee stock purchase plan stock, Turbo Tax mentions that the Box A (or D) 1099-B cost basis provided by the financial institution is incorrect and the supplemental information they provide has the correct cost basis.  I have both of these cost basis numbers and can see the difference.  When I choose to make adjustments, it appears there are adjustment codes to use.  What is the correct code to use in this case (ESPP stock sale adjustment)?

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1 Best answer
Level 13
Jun 7, 2019 4:24:48 PM

With the sale of ESPP stock you have 2 ways of entering the sale:

  1. You enter all the information on the "Tell us about your [Broker Name] 1099-B" page, entering the 1099-B exactly as it reads, wrong basis and all, and then click the "I'll enter additional information on my own" button and on the next page enter the correct basis.
  2. You enter all the information on the "Tell us about your [Broker Name] 1099-B" page, entering the 1099-B exactly as it reads, wrong basis and all, and then click the "Guide me step-by-step" button, telling TurboTax that you're entering the sale of stock received via an ESPP, and completing the interview.

Either method, properly done, should result in a correctly entered sale.  The first method puts a "B" in column (f) of the Form 8949 while the second method puts an "O" in column (f).  As far as I can remember TurboTax has always entered transactions using the two methods with these two different codes.  Code "B" would seem to be the correct code here given the IRS's instructions:

  1. You received a Form 1099-B (or substitute statement) and the basis shown in box 1e is incorrect...
  2. If this transaction is reported on a Part I with box A checked at the top or if this transaction is reported on a Part II with box D checked at the top, enter the basis shown on Form 1099-B (or substitute statement) in column (e), even though that basis is incorrect. Correct the error by entering an adjustment in column (g)...

However, your obligation as a taxpayer is to properly report your income.  Having done that you are pretty much bullet proof when it comes to the IRS and I wouldn't lose a minutes sleep over what codes are used in column (f).  You can go into "Forms mode" and override the code TurboTax has used, but I just wouldn't bother; at this point we're simply talking about "style", not "substance".

Tom Young

3 Replies
Level 15
Jun 7, 2019 4:24:43 PM

<a rel="nofollow" target="_blank" href="https://thefinancebuff.com/adjust-cost-basis-for-espp-sale-in-turbotax.html">https://thefinancebuff.com/adjust-cost-basis-for-espp-sale-in-turbotax.html</a>

Level 2
Jun 7, 2019 4:24:47 PM

Thanks, the link you provided was helpful and in the example shown the code used was B.  Turbotax requires more than one code...will look at it further.

Level 13
Jun 7, 2019 4:24:48 PM

With the sale of ESPP stock you have 2 ways of entering the sale:

  1. You enter all the information on the "Tell us about your [Broker Name] 1099-B" page, entering the 1099-B exactly as it reads, wrong basis and all, and then click the "I'll enter additional information on my own" button and on the next page enter the correct basis.
  2. You enter all the information on the "Tell us about your [Broker Name] 1099-B" page, entering the 1099-B exactly as it reads, wrong basis and all, and then click the "Guide me step-by-step" button, telling TurboTax that you're entering the sale of stock received via an ESPP, and completing the interview.

Either method, properly done, should result in a correctly entered sale.  The first method puts a "B" in column (f) of the Form 8949 while the second method puts an "O" in column (f).  As far as I can remember TurboTax has always entered transactions using the two methods with these two different codes.  Code "B" would seem to be the correct code here given the IRS's instructions:

  1. You received a Form 1099-B (or substitute statement) and the basis shown in box 1e is incorrect...
  2. If this transaction is reported on a Part I with box A checked at the top or if this transaction is reported on a Part II with box D checked at the top, enter the basis shown on Form 1099-B (or substitute statement) in column (e), even though that basis is incorrect. Correct the error by entering an adjustment in column (g)...

However, your obligation as a taxpayer is to properly report your income.  Having done that you are pretty much bullet proof when it comes to the IRS and I wouldn't lose a minutes sleep over what codes are used in column (f).  You can go into "Forms mode" and override the code TurboTax has used, but I just wouldn't bother; at this point we're simply talking about "style", not "substance".

Tom Young