Long story short, I have some ISOs that I exercised in 2023, and sold in 2024. The sale occurred two years after the grant date, but less than one year after the exercise date, so it is a disqualifying disposition. This ISO sale is NOT reflected in box 1 or 14 of my 2024 W-2. I received a 1099-B from my broker showing the sale, however, my understanding is that I need to manually adjust the cost basis to split the ordinary income and capital gains. Including figures below.
Exercise Price = $1.84
Market Price on Exercise Date = $10.25
Final Sale Price = $15
Number of Shares = 300
1099-B shows:
Proceeds = $4500 (300 shares * $15)
Cost = $552 (300 shares * $1.84)
Based on my understanding/calculations:
ordinary income = ($10.25 - $1.84) * 300 shares = $2523
capital gains = ($15 * 300 shares) - ($10.25 * 300) = $1425
adjusted cost basis on capital gains portion = $3075
I was able to adjust my cost basis for the capital gains portion on the 1099-B through TurboTax easily.
What I am confused on is the ordinary income portion. Do I need to report this anywhere, and if so, where? When I exercised these in 2023, I did not pay any taxes, nor was there anything about this on my 2023 W-2. I looked at my 2023 tax return, and see the ordinary income amount ($2523) on Form 6251, Part I 2i (exercise of incentive stock options). Not sure if it matters, but my AMT amount on Form 6251 line 11 was $0.
