Another Options Inquiry

[MsTabbyKats]

Just making sure client isn't double taxed.....and I'm rounding numbers

W-2

Box1.... $350,000

Box 12....V....$157,000

1099-B

Bought...10/10/12

Sold..02/11/13

Proceeds.....$185,000

Basis......$165,000

Instructed to use short term...check box B

So...that's what I did...Scheduled D...short term....$20,000 gain

I ask....because I usually have a $0 gain on the B....but I think that's due to selling them on the date exercised. In this case...the price went up during the holding period.

Did I did this correctly?

[Terry D EA]

Yes, the gain is reported as short term as it was held for less than one year.

[Pacun]

It seems correct to me.

[Jack from Ohio]

Basis = $157,000 - The amount that was added to and taxed on his W-2. Box 12 code V

[jklcpa]

Basis = $157,000 - The amount that was added to and taxed on his W-2. Box 12 code V

I agree with Jack IF the client didn't have any additional cash outlay to obtain the shares. Where did your basis figure of $165K come from? Was the additional $8K due to client having to pay for the difference (the increase) in value from the grant date to the exercise date?

[joanmcq]

The amount coded V is the difference between the FMV on date of exercise and the exercise price. The additional basis is what he actually had to pay for the shares at the exercise price. Jack's scenario only holds if the exercise price was zero; something you never see with nonqualified options. The spread is considered wages, which is why it is taxed as such on the W2. But you do have to pay for the shares.

[MsTabbyKats]

Thanks.....

I got my figures directly from the W-2 and 1099-B.