Tom, can you please provide guidance for ESPP (qualified and non) in Turbo step by step? (two scenarios):

[pawpatrol]

Case1:
1a.  Qualified non-covered: 505 EMC purchased on 12/31/09 at $14.85 with FMV $17.47 & offering period FMV/date = $13.14/(7/1/09 to12/31/09). Discount is 15%.
1b. 1099B says: proceeds=$12,145, basis=(is it $4843??), compensation inc=???
I did the following: Declared ESPP sales and Inserted the values form 1a. in step-by-step. Then in the view form worksheet overridden cost to $4842.95 =505*(14.85-5.26). I end up with LT gain of 7302.30 and compensation income=995.36 (this is not in my W2)
Case 2:
2a. Disqualified covered: 356 EMC form 3922 (box1=8/1/15, box2=1/29/16, box3=26.89, box4=24.77, box5=21.05, box7=1/29/16, box8=22.85), comp income in W2=$1324.32
2b. 1099B says: proceeds=$8562, basis=$5620.92
I did the following: Declared ESPP sales and Inserted the values form 2a. in step-by-step. Then in the view form worksheet overridden cost to $5620.92 from 1099. I end up with  ST gain of 2940.88 and compensation income=1324.32 (does this make my base 5620.92+1324.32 ?)

[TomYoung · Accepted solution]

Your Disqualified sale results in a per share basis of the EMC stock tendered of $24.77 for a total basis of $8,812.12.

The Sec 351 gain to report here is $1,401.92 which is your "real" gain based on total proceeds of cash plus stock.  That's the gain you report since its MORE than the cash received for the lot.

The Redemption gain to report is $214.64.

Total gain to report = $1,401.92 + $214.64 = $1,616.56

It's clear the 1099-B is putting the 2 calculations together for reporting purposes ($7,180.52 cash for Sec 351 and $1,381.28 cash for Redemption = $8,561.80) for a reported gain of $2,940.88.  So clearly the $1,324.32 of W-2 income needs to be included in the broker-reported basis which is reflecting only your out of pocket cost.

Enter the 1099-B exactly as it reads and then click the blue "I'll enter additional info on my own" button.  On the next page enter the correct basis in the "Corrected cost basis" box.  The correct basis is: $5,620.92 + $1,324.32 = $6,945.24.

As to the Qualified sale it's clear that the compensation and addition to basis is the discount applied to the grant date FMV of $13.14 so ($13.14 x .15) + $14.85 = $16.82 per share for a total basis of $8,494.10.

That results in a Sec 351 gain of $5,472.28 (actual gain) and a Redemption gain of $835.63 for a total gain of $6,307.91.

Again the broker has combined the 2 calculations for reporting proceeds and basis.  I can't make sense of that basis you've figured but I'd say the basis to use here is $5,837.34 so $12,145.25 - $5,837.34 = $6,307.91.  That includes the ($13.14 x .15) x 505 = $995.36

I'd tell TurboTax about the line 7 adjustment needed for the Qualifying trade by:

Starting the "Miscellaneous Income, 1099-A, 11099-C" interview.
Starting the "Other income not already reported on a Form W-2 or Form 1099" interview.
Answering "Yes" on the "Other Wages Received" page.
Entering $0 on the "Wages Earned as a Household Employee" page.
Entering $0 on the "Sick or Disability Pay" page.
Answering "Yes" on the "Any Other Earned Income" page.
Ticking "Other on the "Enter Source of Other Earned Income" page.
Entering a description and an amount on the "Any Other Earned Income" page.

Tom Young

[pawpatrol]

Tom, thank you for the thorough response. Follow-up question please on the qualified case: It seems that I can avoid the cumbersome 1099 approach if I declare that the $995 is not in the W2 by using the "view form" and therefore it will be added to line 7. Summary: proceeds $12,145.25, gain=$6307.91, basis = $5,837.34 and income not included in W2=$995.36. Do you agree?

[TomYoung]

Never tried it but but if it does the job and doesn't prevent you from e-filing then go for it.

[pawpatrol]

yep, it works -:) Thank you so much!!!!!!!!!!!!!!!!!!!!!!!!!