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Strategies & Market Trends : IRS, Tax related strategies--Traders
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To: RavMan who wrote (791)4/13/1999 8:04:00 PM
From: Spots  Read Replies (1) of 1383
 
>>calculate taxes on the employee
stock purchase plan?

Since you sold immediately after purchase, the important
points for you are going to be the grant price (what you
bought it at), and the fair market value on the date of
exercise.

You are going to get zinged for ordinary income on the
difference between the price you paid and the fair market
value on your date of purchase. The fair market on
date of purchase will then become your stock basis,
from which you will compute short-term gains or losses.

If your sale was early enough in the tax year, your company
will generate a 1099 for the ordinary income part, but my
experience is if you sold within a month or two of the end
of the tax year they can't handle it. But the rules are
still the same, and you have to declare the diff between
the fair market on your date of purchase and the price you
got as ordinary income. Assuming it's positive, that is.

It's a hell of a mess if you're unlucky enough to buy at
a big gain and then sell later at a loss. You end up
in the position of paying ordinary income on a gain
and trying to balance that against a capital loss (which
is limited to 3000 a year). Ugh. Don't, unless you
think holding will generate a bigger loss. Holding
two years (yes, two) will get you out of most of the mess.

Spots
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