Espp And Stock Options

http://www.fairmark.com/execcomp/index.htm

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

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License