Discussion:ESPP Ordinary income calculation
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Discussion Forum Index --> Basic Tax Questions --> ESPP Ordinary income calculation
Discussion Forum Index --> Tax Questions --> ESPP Ordinary income calculation
Inagpurwala (talk|edits) said: | 12 December 2007 |
| I understand that if ESPP shares are sold under two years of holding period, then 15% discount is treated as Ordinary Income for tax purpose.
I am working on 1040X – 2005 for a client and it seems that for one block of shares, ProSeries (ESPP Worksheet) is not calculating Ordinary income amount correctly. Here is info details: 1st Block trade: Offer date 03/03/03 Mkt Price at Offer date $20.44 Purchase date 08/31/04 Mkt price at purchase date $15.96 Purchased price $13.56 Commission on sale $20. Number of share sold 342 Date sold 11/18/05 Calculated (ProSeries) Ordinary income $1049 = 342 X 3.06 This calculation is correct. 2nd Block trade: Offer date 03/03/03 Mkt Price at Offer date $20.44 Purchase date 02/27/04 Mkt price at purchase date $29.62 Purchased price $17.37 Commission on sale $14. Number of share sold 332 Date sold 09/01/05 Calculated (ProSeries) Ordinary income $473. Per my calculation it should be $1018 = 332 X 3.06 Question: Where I am making error? Thanks in advance IshaqInagpurwala 16:09, 12 December 2007 (CST) | |
Death&Taxes (talk|edits) said: | 12 December 2007 |
| I am using the same figures and Proseries is giving me $1018 in case #2. I am using 2005 software and checking the ESPP block. BTW the commission on that worksheet is that paid on purchasem, not on sale. You don't give us the sale proceeds, but I don't think that important in calculating the ordinary income element. | |
Inagpurwala (talk|edits) said: | 12 December 2007 |
| Thanks D&T.
1st block sales proceeds $6,906 2nd block sales proceeds $6,241 I am also using Proseries (Basic) 2005.
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Death&Taxes (talk|edits) said: | 13 December 2007 |
| Aha, the total gain on the transaction is 474, so that has to be the ordinary income since it is smaller than the discount. In the first scenario the gain was larger than the discount.
But if the ordinary income were to be included in the W-2, you will have to increase the basis with it and have a Sch D loss. It shouldn't be. | |
| 13 December 2007 | |
| 1st trade: Bargain element is $2.40/share ($15.96 - $13.56) x 342 shares = $821. Where are you getting $3.06?
The holding period requirement to make the dispositon a Qualifying Disposition is 2 years from grant (not 2 years from purchase) and 1 year from purchase. Also, on a Qualfying Dispostion, the portion of the gain that represents the bargain element is always ordinary income. | |
