Friend called me. He says he exercised some employee stock options, which he immediately sold, in 2008. His company included the profit in his W2 as I understand it, as well as including it in whatever reports such maneuvers. He said if he reports it under both categories it appears to really jack up his taxable income. Since this is beyond me (to whom he came for advice) based on what little info I have, where should I tell him to look, or handle it, or whatever. Best I could come up with was to call IRS and ask them.
Reporting Stock options
Feb 17, 2009
2 Replies
Which is correct.
The sales proceeds are required to be reported on 1099-B, yes.
It gets reported in both places. However, he has to adjust the basis in the sold stock upwards by the amount reported on the W-2. This will eliminate virtually all the apparent capital gain and thus eliminate the apparent double-taxation problem.
See here as well:
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-- Rich Carreiro snipped-for-privacy@rlcarr.com
And furthermore, he might end up with a loss equal to the commissions. Suppose the W2 income because of profit from exercise is $4000, and the proceeds are $16000. If the commissions are $20, then the cost basis on Schedule D is $16020, and you have a net loss on Schedule D.
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