How to calculate stock basis on a stock acquired before moving in US

[wlzhangking]

Hello,

I moved in US and become an resisdent in late 2018, before that I have some ESPP and company vested RSU stocks in my ETRADE account not sold, but already paid tax in foreign country when ESPP purchased or RSU vested in earlier 2018.  I sold these stocks in late 2019 and need to file tax for 2019.

How can I calculated the cost basis for these stocks due to the previous tax paid in foreign country? If the foreign tax is not accountable, the cost basis for at least RSU would be zero and induce a lot of double tax.  

Further more, I have some excessive foreign income tax credit generated in 2018, but could not be used in 2019 since I have no foreign income in 2019. So not able to used it to deduct the tax for the double tax either.

Please help to adivise if you have any good options! Appreciate for your kind help!

[DawnC]

If you can't claim a credit for the full amount of qualified foreign income taxes you paid or accrued in the year, you're allowed a carryback and/or carryover of the unused foreign income tax. You can carry back for one year and then carry forward for 10 years the unused foreign tax. For more information on this topic (including taxes paid or accrued in years before 2007), see Publication 514, Foreign Tax Credit for Individuals.

For your RSUs, the basis of the shares is the market rate of the shares at the time they vested that was reported as income on the W-2.  How to report Restricted Stock Units

For your ESPP stock, you will need information from Form 3922 (received from employer) to ensure your capital gains or losses are calculated correctly. If you misplace Form 3922, contact your ESPP plan administrator.  You most likely had compensation amounts reported on your W-2 for the ESPPs in addition to what you paid for it. Employee Stock Purchase Plans

Since you sold employee stock, you will likely need to adjust the cost basis of your stock.  Adjusting the cost basis will help you report your sales accurately and get the best tax outcome.  TurboTax Premier will guide you through adjusting the cost basis, but you’ll need to enter your sales one at a time.  

[wlzhangking]

Thanks DawnC!

My question is how to calcualte the cost basis because the tax first time paid is in foreign countries when stocks were vested before I moved in US, thus neither W2 in 2018 nor 2019 has included the capital gain when they were vested in 2018. So it looks like I could not enter any cost basis at least for RSU for the tax filing in 2019, and thus the cost basis for RSU would be zero and will induce lots of double tax. Althought the cost basis is already shown in my ETRADE account for these stocks.  

In another hand, the excessive credit from 2018 could not be used in 2019 and most likely later years due to no foreign income. So I have to pay for the double tax and no other good options.  Really depressed!

[DavidD66]

If the correct cost basis is on your E-Trade account statement, use that to report your sale.  If you know your cost basis, you don't need to go through the steps to calculate it in TurboTax, just enter the 1099-B as you would any other stock trade.

[wlzhangking]

Thanks David! The cost basis for RSU are 0 in 1099B. While there is another real cost basis shown in my Etrade account online. But I am afraid I could not use the real cost basis from Etrade online to report in the turbotax because non of the RSU captain gain is incldued in my 2018 and 2019 W2. That is the question I asked here in case any other better options than just reporting '0' RSU cost basis.

[DavidD66]

If you paid foreign tax on the RSUs, then your cost basis is the same value that was used to determine that tax.  If you either reported the RSUs as foreign income, or weren't required to report your foreign income (dual status alien, perhaps), then it doesn't matter that it wasn't included on your W-2.   

[wlzhangking]

Thanks David! I just concern because the cost basis could not be tracked by IRS from W2, IRS might treat the cost basis of this RSU as zero, so it may not be appropriate to adjust cost basis in turbotax to the real value by myself, otherwise I am afraid the RSU may audit me. I think the right way is to use foreign income credit to deduct the double tax, although I could not use it due to no foreign income in 2019, really a puzzle. 

[RobertG]

You should report your basis as correctly as you can.

The IRS does not know your basis and does not do a matching calculation for RSUs. 

They just check to see if all 1099s have been reported.

If you were to be audited, they would just ask you how you came up with your number for the basis.  If you used a reasonable method, you're fine.

[wlzhangking]

Thanks RobertG!

Because on 1099B, cost basis is 0 for RSU, I suppose IRS will know the exact RSU cost basis from W2, if that is not match with what I report, IRS system may triger an alert, is my assumption correct?

One more question, from Etrade online, the RSU cost basis should be in the Adjusted cost basis column or Acquisition cost column?  The data in which column should I use in turbox as RSU cost basis?

[RobertG]

The IRS does not know what your basis is.

You need to know how much you reported as income when the stocks vested.  That is your basis, or acquisition cost.

You need to either find out how much you reported, or estimate based on the value of the stocks when they vested.