Cost Basis for Old Stock Options

[DawnC]

You should receive a Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c) from your employer when the employer has recorded the first transfer of legal title of stock you acquired pursuant to your exercise of the option. This form will assist you in tracking your holding period and figuring your cost basis for the stock purchased through your qualifying plan.

Tracking cost basis

Finding cost basis

If your employer grants you a statutory stock option, you generally don't include any amount in your gross income when you receive or exercise the option. However, you may be subject to alternative minimum tax in the year you exercise an ISO. For more information, refer to the Instructions for Form 6251. You have taxable income or deductible loss when you sell the stock you bought by exercising the option. You generally treat this amount as a capital gain or loss. However, if you don't meet special holding period requirements, you'll have to treat income from the sale as ordinary income. Add these amounts, which are treated as wages, to the basis of the stock in determining the gain or loss on the stock's disposition. Refer to Publication 525 for specific details on the type of stock option, as well as rules for when income is reported and how income is reported for income tax purposes.

[4-Speed]

I did not receive any form 3922 on any of my options when they were originally granted in 1998 and 1999.  Also, the original options were non-statuatory.  Income tax was withheld on my 2001 W-2 when the options were exercised as cash reloads.  

[ThomasM125]

The discount on the shares would have been reported as wage income on your W-2 form in the years you acquired them. You will need to add that amount to what you paid for the shares and that would be your cost basis. 

[4-Speed]

Thank you!