ISO exercise in 2016. Company acquired in 2020. Proceeds from shares received in 2021. How to deal with 2021 1099-B, when date listed in box 1c is the 2020 acquisition date?

[ask4babs]

My husband exercised options (ISO) to purchase shares of his then-employer’s stock back in 2016. The company was acquired in 2020; he no longer worked there. The third party that handled the acquisition (SRS Acquiom) contacted him about relinquishing his stock certificate in January 2021. 

He couldn’t find the certificate, so he did an attestation that the cert was lost. He eventually received a check for the proceeds from the sale of his shares in October 2021.

We have received a 2021 1099-B from SRS Acquiom, but we cannot enter this sale because the “date sold or disposed” date in box 1c is in December 2020 (the date of the acquisition). TT is telling us that the date sold is not valid.

In case it helps, these are all the 1099-B boxes that are filled in, aside from the proceeds in box 1d:

Box 1c: 12/10/2020 — the date the acquisition closed

Box 5: Is checked (noncovered security)

Box 6: Gross proceeds reported to IRS

Box 9: Unrealized profit or (loss) on open contracts — 12/31/2020

Box 10: Unrealized profit or (loss) on open contracts — 12/31/2021

Any advice on how to handle this? Thanks!

[ask4babs]

Still hoping that someone out there can advise me on this, but in the meantime I'll add that on the TT screen it says, "short sales can be sold prior to 2021." This isn't a short sale, though, I don't think?

TT also says "you can correct the date sold" ... but if I do that, the date won't match what's on the 1099-B. 

Thanks again for any help. 

[GeorgeM777]

You're correct that the transaction you describe is not a short sale.  Therefore, don't characterize this transaction on your return as a short sale.  The important, and overriding goal, is to have an accurate tax return.  The issue you describe is essentially one of constructive receipt of income versus actual receipt of income.

Under the cash method, you not only report income in the year it is actually received, you also report income in the year it is constructively received.

Constructive receipt refers to income that you do not have physical possession of but it has been made available to you without restriction. In other words, you have constructive receipt of income when you have control over such income.

Based on the facts that you describe, it does not appear that you had actual receipt of the funds from the sale of the shares, but it also does not appear that you had constructive receipt either.  In such circumstance, it seems reasonable to report the income in 2021, rather than amending your 2020 return to report the income in 2020.  Thus, include the October 2021 date as the date of sale (the actual day in October 2021 could be the day you received the check).  Keep your records, such as a copy of the check, to demonstrate that while the 1099-B shows a December 2020 date of sale, based on actual and constructive receipt of income principles, it was more appropriate to use an October 2021 date of sale. 

@ask4babs

[ask4babs]

Thank you @GeorgeM777. You're correct, there was no actual or constructive receipt in 2020. I do have a copy of the check, plus other documents. But just to be sure I understand ... should I change the date of sale in Box 1c to the October date in TT?

Thank you again for your help!

[DianeW777]

Yes, change the date of sale to reflect the actual timeframe you had constructive receipt in 2021, based on your facts and circumstances as advised by our awesome Tax Expert @GeorgeM777.

[ask4babs]

Thanks so much!