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Confusion over Form 3922, cost basis, ESPP transfer of stock, box 8 (FMV) vs box 5 (price)

I'm thoroughly confused what cost basis to use for my schedule D based on the 'new' form 3922 "Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c)".

Form 3922: Box 5 "Exercise Price Per Share" = $4.9385 Form 3922: Box 8 "Exercise Price Using Grant Date FMV" = $5.0745

Since the same-day (exercise + sell) transaction only involved 980 shares, there is only about a ten-dollar difference in the taxable result; but that doesn't change my confusion as to WHICH 'cost basis' to properly use when reporting to the IRS.

Had I NOT received Form 3922 from my employer, I would have used a cost basis of $4.9385/share (minus minor fees).

Now that I have received Form 3922, I am not sure if I should use that cost basis (which I used in years past), or the "FMV cost basis" of $5.0745.

Since my net, from E-Trade (after commission & fees) was $5,938.37, I guess I can 'work backward' to an estimated cost basis ... but my question is what's the 'right' thing to report?

For ESPP shares, do I report on schedule D a cost basis of the exercise price (box 5 of Form 3922) or the FMV exercise price (box 8 of Form 3922)?

Reply to
Aaron FIsher
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If these are non qualified stock options, then your gain was already added to your W2 and taxed. Look in box 12 of the W2 for an indication of this, as well as in your stock paperwork. On Schedule D, the discount price you paid for the stock plus the portion that was added to your cost basis is the cost basis. If this was a same-second exercise and sell then the cost basis ultimately equals FMV, and selling price will be FMV minus commissions, leaving with a small loss equal to the commissions.

If these are incentive stock options I'm not quite sure what the approach is.

Reply to
removeps-groups

These are qualified stock options as Form 3922 is only used for stock purchased through an Employer Stock Purchase Plan (ESPP).

As the transaction was same day, it is a disqualifying disposition. The cost basis is the actual price paid for the shares plus the amount (if any) added to the W-2 as compensation that represented the discount from market price on the date of purchase. The whole transaction gets entered in Part I of the Schedule D.

Reply to
Alan

Use Box 5. Your "exercise price" is your cost basis + any fees that you paid. Box 8 might be needed if you held the shares after purchase and had a "qualifying disposition". Since you sold the shares right away, you have a "disqualifying disposition" and you don't need to use Box 8.

Reply to
Elizabeth

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