Rev. date: 08/21/2012
If you
can
identify which shares of stock you sold, your basis is:
-
What you paid for the shares sold plus any costs of purchase.
-
The total of all the acquisition costs of all the shares sold if you sell a block of the same kind of stock and you report all the shares sold at the same time as one
sale.
If you
cannot adequately identify
the shares you sold and you bought the shares at various times for different
prices, the basis of the stock sold is:
Rev. date: 08/04/2012
You have taxable income or a deductible loss when you sell the stock. Your income or loss is the difference between the amount you paid for the stock (the option price) and the amount you receive when you sell it. You generally treat this amount as capital gains or losses however, you may also have ordinary income to
report.
The holding period requirement is satisfied if you do not sell the stock until the end of the later
of:
- The 1-year period after the stock was transferred to you, or
- The 2-year period after the option was granted.
If the holding period requirement is satisfied:
- The sale of stock is treated generally as giving rise to capital gain or loss. You may have ordinary income if the option price was below the stock's fair market value at the time the option was granted;
or
If the holding period requirement is not satisfied:
- The ordinary income that you should report in the year of the sale is the amount by which the fair market value of the stock at the time of purchase (or vesting, if later) exceeds the exercise price. Any additional gain or loss is treated as capital gain or
loss.
If the holding period requirement is satisfied but the option exercise price is below the fair market value of the stock at the time the option was
granted:
- On Form 1040, Line 7, you report as ordinary income (wages) the lesser of (1) the amount by which the stock’s fair market value on the date of grant exceeds the option price or (2) the amount by which the stock’s fair market value on the date of sale exceeds the option
price.
- If your gain is more than the amount you report as ordinary income, the remainder is a capital gain reported on
Schedule D (Form 1040) (PDF).
If you do not satisfy the holding period requirement and sell the stock for less than the amount you paid for it, your loss is a capital loss, but you still may have ordinary
income.
Rev. date: 08/04/2012
For most taxpayers,
Form 1099-B should match
Form 8949,
Sales and Other Dispositions of Capital Assets. Regarding a small number of 2010 short sales, some non-calendar year taxpayers may have Forms 1099-B and 8949 which do not agree. If you received a Form 1099-B for a short sale you entered into before January 1, 2011 but that did not close by the end of the taxable year, report it on line 1 or 3 of Form 8949,
Sales and Other Dispositions of Capital Assets. Enter the sales price in column (e). If the short sale did not close in the year of your tax return, enter “Open Short Sale” in column (f) and the negative of the sales price in column (g). When the short sale is closed in a later year, report any gain or loss on your return for that
year.
For calendar year taxpayers, if you entered into a short sale on or after January 1, 2011, you will receive a 1099-B for the year in which the short sale closed. Both proceeds and basis information related to the short sale will be reported at the same time, so amounts reported on Form 1099-B should agree with your Form
8949.
For more specific rules refer to
Publication 550,
Investment Income and Expenses.
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