Hello, I exercised ALL of my ISO shares and sold them in the same tax year. The bargain element shows up on my W2 and I have a 1099-B for the short-term sale. The price i sold at was less than my bargain element. With that said, TurboTax is showing my income as the sum of both the bargain element and the short term sale so i believe it's being double counted. How do I get the system to calculate the right amount of income?
If you exercised ISOs and sold them in the same year at price below the fair market value of the stock on the date of exercise, but above the exercise price, then you have ordinary income equal to the strike price plus the bargain element - which is also your cost basis. You also have a short term capital loss equal to the cost basis less the sales proceeds. Your 1099-B is probably wrong - brokers don't include the bargain element in the cost basis. You will have to adjust it. To do so, go to:
- Federal Taxes
- Wages & Income
- Investment Income
- Stocks, Mutual Funds, Bonds, Other
- Answer Yes you received a 1099-B
- Do not enter your broker-dealer name and download your 1099-B, instead,
- Click on "I'll type it in myself"
- Enter your Broker and click Continue
- Indicate the type of trades you have on your 1099-B (A, B, D, E, X)
- Enter the details of your transactions as reported on your 1099-B THEN
- Check the Box for "This sale involves an employee stock plan (including ESPP) or an uncommon situation". Additional information will appear. Click on Start Now
- Indicate "I have sales from an Employee Stock Plan, including ESPP, NQSO, ISO, RS, and RSU"
- Follow the instructions for the type of employee stock plan you have. Additional information on these plans is available by clicking the blue Learn More link