Espp And Stock Options

for non-qualified stock options.

from broker:

(shares quanitity * Sell Price ) - Option Cost = Non Qual Stk Option item in W2
refer 2006 broker file 4 page2&3:
(744*$23.90-$7,253.26) + (625*$23.90-$11,606.25) + (625*$23.90-$10,006.25) = $18,790.84

The dates on which the option becomes exercisable are called the vesting dates. These dates are obviously significant, but you don't report income on these dates.

Q: Why do I have gain or loss when I sold the stock at the same time I exercised?

A: Usually there's a small gain or loss to report, for two reasons. First, the amount reported on your W-2 as income is usually based on the stock's average price for the day you exercised your option, but the broker may have sold at a price slightly above or below that average price. And second, your sale proceeds are likely to be reduced by a brokerage commission, which can produce a small loss. But any gain or loss should be minimal.

this is reflected in 2006 schedule-D Part1, line 2,3,4

for dis-qualified ESPP.

from company record:

Total value on purchase date - total purchase price = ESPP Disq Disp item in W2
refer 2007 espp record, file 3: $5,570-$4714.10 = $855.90

from broker
profit = capital gain/loss = sales proceddings from broker -total purchase price
refer 2007 espp record . file 2. capital gain= $5,798.91-$5,570.00=$228.91

for qualified ESPP.

dicount = from company record = Total value on purchase date - total purchase price(your cost) = 15% discount
profit = from broker record = sales proceedings from broker -total purchase price = capital gain/loss

compensation income is reported in your w2, it is not capital gain.
for qualified ESPP, Your ordinary compensation income from ESPP shares in a qualifying disposition is the lesser of the two amounts described above = min(discount,profit). If the company provides no discount on the shares, the compensation income is zero. Likewise, in a qualifying disposition, if you have no profit as of the date of disposition, you don't report any compensation income.

This is a significant difference from a disqualifying disposition, where you generally have to report compensation income(as 15% discount) even if you do not have a profit.

whether your ESPP disposition is a disqualifying disposition?

In general, this is any disposition (sale or gift) unless both of the following are true:

* It is more than a year after the purchase of the shares, and
* It is more than two years after the beginning of the offering period.

basically if Your company's ESPP has a six-month offering period,you would have to hold the shares more than 18 months from the beginning of the offering period
or 12 months after your purchase date

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