1099-B Restricted Stock Options sale...Do I need to file a Schedule D?

You need to report this on a Sched D, or else the IRS will believe the entire $XXXXX.XX is a capital gain and dun you for additional taxes, interest, and penalties.

You report the proceeds as listed, and for basis, use the option exercise price increased by the amount of income from the exercise reported on your W-2.

And the one bonus from all of this is that could have a net loss on Schedule D equal to the commission. The W2 includes the difference between exercise and strike price times the number of shares. But they may not have subtracted out the commissions. So you get to report it on Schedule D.

Thanks Rich. I'm still a little unclear though.

These Restricted Stocks are a little different than normal stock options, I think. They were a part of my original compensation package at my hire date, but I also bought them outright on that date as well. I paid $0.001 per share on my date of hire for 1500 shares, of which 300 shares vest every year after my date of hire. When I reached my first year anniversary, I did a "paperless transfer" where I sold all of them and allowed my company to take out the appropriate shares to pay for taxes and admin fees of the broker handling the stocks.

So, I'm wondering what the exercise price might be in this case. I'm guessing it would be $0.30? (300 x $0.001)?

I think an example might help here.

W-2: Restricted Stock Award: $999.70

Confirmation of Release: Award Price: $0.30 (300 x $0.001)

So in this example would I subtract the Total Gross Proceeds price from the Restricted Stock Award and then add the Award Price to that and use that as my cost basis?

$999.70 - ($665.00) + $0.30 = $335

Is this correct? Cost Basis = $335 ??

========================================= MODERATOR'S COMMENT: Please trim the post to which you are responding.

No, that doesn't really change anything. In fact, it makes it even more straightforward.

Did you file a Section 83(b) election on these shares to treat them as 100% vested for *tax* purposes, or not? Because that matters crucially in determining the basis.

Ok -- that would indicate that you didn't file an 83(b) election, because if you did, there wouldn't be wage income each year as the stock vests. If you're ever again in a situation like this (buying restricted stock up front for a very low price), strongly consider making a Section 83(b) election on it.

In any event, that doesn't change that your basis is exercise price plus wage income recognized upon vesting. The wage income is the spread between the FMV of the stock and the exercise price on the day the block vests.

So your basis is $999.70 + $0.30 = $1,000

No. You add exercise price to "Restricted Stock Award" to get your basis. In this case, your basis is $1000. Since it was sold for $665, you have a capital *loss* of $335 on the sale.

No, I didn't file a Section 83(b) on these, and it would have been quite wise to do so. I didn't pay any taxes on these shares until the time of vesting. Unfortunately, it looks like I'm stuck with that decision for the remainder of the shares that still need to vest over the next 4 years.

One piece of information that might be prudent here is that the stocks I purchased were actually worth about $25 per share at the time of purchase, even though I only paid $0.001 per share. I'm not sure if this really matters though. They were worth more than that at the time of vesting/selling. (Obviously making my example dollar amounts hypothetical.)

I guess I just don't understand what cost basis actually is then. So by listing the original gross value ($1000) of the stocks, is that going to tell the IRS that I've paid my taxes on these stocks? Thanks again for your help!