Reporting SAR

[jmitch33]

I received 5000 SARs, initial value of $.001 that was distributed at a value of $1.6667 for a total payout of $8333.33. They were 100% vested.  I did not receive any 1099 nor was this reported on a W2 or any other form.  Where in TurboTax do I report this SAR transaction and how much of the $8333.33 do I report?

[JohnB5677]

Please clarify the question.

• What is SARs

  • Student Aid Report?

  • Cryptocurrency?

  • Some kind of retirement account?

• I don't understand the numbers

  • 5000 SARs at $.001 at a value of $1.6667?

  • resulting in a payout of $8,333.33?

• What do you mean that "They were vested"?

  • Is this a stock plan?

[jmitch33]

Stock Appreciation Right Agreement (SAR)

The grant price in 2016  was .001 (basically no value).  Vested after 3 years, paid in 2021at 1.6667 x 5000 shares =  $8333.  I am not sure where to report the payout in Turbo Tax.  My research seems to be it should be reported as capital gains vs ordinary income, but not sure? 

[cr-stagg]

https://www.fidelity.com/webcontent/ap002390-mlo-content/18.09/help/learn_stock_appreciation_rights....

What are the tax implications of stock appreciation rights?

There are no federal income tax consequences when you are granted stock appreciation rights. However, at exercise you must recognize compensation income on the fair market value of the amount received at vesting. An employer is generally obligated to withhold taxes. Depending on the rules of your plan, the employer may satisfy that withholding obligation by withholding cash or shares. The remaining net proceeds will be deposited into a brokerage account. If you receive net shares and sell them at a later point, the appreciation in value of the shares from the time of exercise to the time of sale will be treated as a capital gain or loss. Whether it is a long-term or short-term gain or loss will depend on how long the shares are held.

[jmitch33]

I am still not clear as to where in TurboTax I should report the payout since I do not have any 1099's our other IRS forms from the employer?

[PatriciaV · Accepted solution]

Because there are no federal income tax consequences when you are granted stock appreciation rights, you will not report this transaction on your current tax return. This also explains why you didn't receive a tax form t(1099 or W-2) for the SARs. 

However, when you exercise/sell the underlying stock, you will report compensation income on the fair market value of the amount received at vesting. This transaction would be reported in TurboTax under Federal Income >> Investment Income >> Stocks, Cryptocurrency, etc. 

Per IRS Pub 525 Taxable and Nontaxable Income: Stock Appreciation Rights 

Don’t include a stock appreciation right granted by your employer in income until you exercise (use) the right. When you use the right, you're entitled to a cash payment equal to the FMV of the corporation's stock on the date of use minus the FMV on the date the right was granted. You include the cash payment in income in the year you use the right.

[kellyb63]

When I sell SAR what  "Type of Investment" do I report it as on my 1099-B?  The choices are ESPP, NQSO, ISO, RSU, RS, stock (non-employee), Option.

[DaveF1006]

You would enter this information in your Turbo Tax return like it is a stock (non-employee) sale. Enter this in Turbo Tax as ThomasM125 states in his Turbo Tax post.

When you reach the section that says Select and less common adjustments that apply choose the The cost basis on my statement is incorrect option and enter your corrected cost basis, which is normally the income reported on your W-2 form. This is crucial as this determines the correct capital gain in your return.