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Do I enter "Ordinary Income Reported (y)" from supplemental stock plan lot detail into Box 2 :Gain or Loss is Ordinary" about the stock I sold?

 
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Do I enter "Ordinary Income Reported (y)" from supplemental stock plan lot detail into Box 2 :Gain or Loss is Ordinary" about the stock I sold?

NO!.  You enter the 1099-B exactly as it reads and then enter a correction to the basis.  I take it that you sold stock either acquired via an ISO or an ESPP and the sale was a "disqualifying" sale, meaning that you didn't hold the stock for more than 2 years from the grant and and more than one year from the exercise of your option.  A disqualifying sale creates "compensation" income that's typically reported on your W-2, usually with some sort of disclosure in Box 14.  OR, you exercised a non-statutory option - RSU, NQSO, etc. - and sold some of the stock.  In that case the simple exercise created compensation income, also reported on your W-2.

The basis of your stock in this situation is the sum of what you paid for the stock - that's the figure reported by the broker on Form 1099-B plus the compensation created by the sale or created by the vesting or exercise.  The broker is telling you about the amount you need to add to the basis reported on the 1099-B, the compensation created by the sale which is "ordinary" and also reported on your W-2.

Enter the 1099-B as it reads on the default 1099-B entry form but then click on the "I'll enter additional info on my own" blue button.  On the next page enter the correct basis in the "Corrected cost basis" box.  The correct basis is (number of shares sold) x (correct per share basis, which includes the compensation per share)

TurboTax will report the sale on Form 8949 "as reported by the broker" but will put an adjustment figure into column (g) of the Form, a code "B" into column (f) of the Form, and the correct amount of gain or loss which includes the adjustment.

Alternatively you could select "Guide me step by step" and indicate what employer program was used to acquire the stock, but that's not really necessary from an "income tax return reporting" requirement point of view if the compensation WAS reported on your W-2 or you don't know your basis.

Tom Young

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