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Old 02-05-2013, 05:15 PM
 
1,339 posts, read 2,851,965 times
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Let me explain the situation with fictitious numbers. My question is about how to enter these numbers for my 2012 taxes.

In April 2012, I exercised my company's options (10 at $20/option) using Fidelity. The aggregate exercise price for the 10 options was $200 (10 x $20). I had asked my company to withold the necessary taxes on this transaction.

Since I did a same-day-buy-and-sell transaction, Fidelity sold the 10 shares at the market value of $60/share. So the money from the transaction was $600 minus $100 commission, which is $500. My actual gain was $300 [$500 - $200]. Fidelity deposited $500 in my brokerage account, and then out of that, they sent two checks to my company -- one check of $200 (aggregate exercise price) and another check of $100 (federal and state taxes). My company recorded the transaction in order to record it on my W2 statement.

Now, I have received a 2012 W2 from my company that shows the actual gain of $300 in Box 14 with ISO text next to it. I received a 1099-B from Fidelity "2012 Proceeds from Broker and Barter Exchange Transactions" which only shows $500 in Box 2a "Sales Price of Stocks". Box 3 for Cost Basis saus "Unknown." The Gain/Loss box is blank. In Box 4 "Federal Income Tax Withheld", it shows 0.00 and Box 15 "State Tax Withheld" is blank.

How do I handle this scenario? I am using TurboTax for my taxes. I have imported my W2 but not the 1099-B.

Please advise.
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Old 02-06-2013, 06:31 AM
 
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I read up the TurboTax literature (http://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Incentive-Stock-Options/INF12049.html) and have almost all of my questions answered since I'm in category #2. So basically, my gain from ISO is a disqualifying income and should be taxed at my ordinary tax rate rather than a capital gain/loss rate. Here is the only one:
  1. Based on the Turbo Tax article above, the Schedule D should show no gain or loss since the stock transaction is to be taxed at the ordinary rate. But it does not talk about how to handle broker commissions. For example: Cost Basis is (10 x $20 grant price) + ($300 gain included in W2 Box 1) = $500. My Sales Price [reported on Fidelity's 1099-B] is (10 x $60 sale price) - ($100 commission) = $500. But I always thought that any broker commission should be added to the cost basis, in which case, my cost basis will be $600 and sales price will be $500, thus showing as a capital loss.
Can you please advise? Thanks.

Last edited by kutra11; 02-06-2013 at 07:18 AM..
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Old 02-07-2013, 11:06 PM
 
Location: Upper East, NY
1,144 posts, read 2,541,370 times
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Commission at sale time is deducted from the sales price.
Your cost basis is $200; sales price $500.

Your employer has it wrong and should give you a corrected W-2 that shows the $100 in taxes withheld in the Federal/state lines.
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Old 02-16-2013, 01:55 AM
 
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You also need to file 1099-B form in the case of earned commission.
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