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Discussion:Stock options code V - reconciling 1099B to W2

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Discussion Forum Index --> Tax Questions --> Stock options code V - reconciling 1099B to W2

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Rookie (talk|edits) said:

14 February 2006
Does anyone knows what is the right way to deal with taxpayers that have stock options on their W-2. it shows V code on box 12, but taxpayers also has 1099-B. this form shows exactly the same amount as the one on the w-2. i've heard that figues from 1099 go on schedule D with code E in the L S column.

Taxref (talk|edits) said:

14 February 2006
The amount in block 12 is already included in wages, so you don't have to add it there. The same amount is the selling price on Schedule D. That amount plus the commissions is the basis, so there will be a small loss.

Rookie (talk|edits) said:

14 February 2006
could you be so kind as to give an example thank you

Taxref (talk|edits) said:

14 February 2006
Taxpayer has federal wages on W2 of $51,000, with $1,000 in with Code V in block 12. Enter $51K in wages on W2. He exercisee his options and immediately sold for $1,000. His 1099B shows a sale of $1,000 with a commission of $25. On Schedule D his selling price is $1,000 and his basis is $1,025 ($1K + 25). Alternately, his 1099B may show a net sale of $975 (1K - 25 commission). In that case the selling price would be $975 and the basis $1K. In either case he has a STCL of $25.

Cooperfer (talk|edits) said:

25 March 2008
Taxref was very informative. Would you also know where to enter FICA and Local taxes withheld on the 1099B? Thanks.

Jdugancpa (talk|edits) said:

25 March 2008
The FICA and withheld taxes are likely already included in the W2.

Southparkcpa (talk|edits) said:

25 March 2008
All due respect, TAXREF is slightly wrong but he clearly know the subject. The V amount is the spread. You could have a 1099B of $100,000, if the V code is $1,000, the basis is $100,025. The 1099B is NEVER the same as the V code. The V is the net gain NOT the total price of the exercize. Search this thread, there was good info previously discussed.

Joanmcq (talk|edits) said:

26 March 2008
South park CPA is right.

Jdugancpa (talk|edits) said:

26 March 2008
Yes, I concur. My comment did not address that. Didn't read close enough to pick up SP's adroit observation.

Southparkcpa (talk|edits) said:

26 March 2008
ADROIT???????????


We are accountants, not english majors.

Obviously a joke.

Good tax season for the next 2 weeks or so all.....

  • transferred in from another discussion, useful info to the topic:

Death&Taxes (talk|edits) said:

13 February 2008
Box 14 is only there for information; I am looking at another client who exercised and cashed an option the same day (an ISO becomes disqualified, or like a NQ option if cashed the same day). He exercised and purchased 1000 shares at 21.75; they were sold by ETrade for 48.30. Included in his W-2 is 26,550, the spread between exercise price and cost. His procees were 48,271, after a $29 charge to sell. On Schedule D there is the sale of 1000 shares, proceeds 48,271, cost 48,300 (21,750 option price and 26,550 included in his W-2), loss $29.

Your way of thinking will work fine as long as the spread is in the wages, but if you held the ISO a year and sold it, it would be a straight capital gain.

Joanmcq (talk|edits) said:

13 February 2008
The spread is what is on your W-2, not your gain. There generally is no gain because the basis in the shares = the price paid for the shares PLUS the spread. So as all these other folks have mentioned, there is usually a small loss for the amount of commissions paid. However, I have seen a gain on same day sales, if the value used for the spread calculation is not the same as the actual sale price. Calculation of basis on a same day sale is: option price per share X number of shares + spread (FMV on date of option - option price) per share X number of shares.
  • useful resources on the topic, from other discussions:

Death&Taxes (talk|edits) said:

14 February 2008
http://www.unclefed.com/AuthorsRow/TaxBusProf/stock-op.html

TexCPA (talk|edits) said:

14 February 2008
here is another link, good books available as well.

[www.mystockoptions.com]

TexCPA

Southparkcpa (talk|edits) said:

11 March 2008
I do quite a bit of options work and have found the following to be a handy rule of thumb:

1) A W2 with a V code MUST have a schedule D. The option income will be fully taxed for both FICA and reg wages.

2) A W2 with ISO will be fully taxed if a cashless excercize but will NOT be taxable for FICA. The ISO falls under a regulation ( a few years old) that exempts it from withholding. Schedule D needed. In this scenario, the taxpayer usually owes big buck . I am proactive here and look for planning opportunities to prepay state if no amt etc....

3) An ISO, purchased and held creates an AMT adjustment. No schedule D.

Death&Taxes (talk|edits) said:

11 March 2008
Southpark's rule works almost every time.

There is a fourth possibility that I only saw once in my life: an employee can purchase a NQ and not sell it. Pays tax on the bargain element when he exercises. Had a client do this with the late, great Global Crossing in 1999. He cashed 90% of his NQ options and for some reason kept 10% thinking in another year he would be able to sell them and get CG treatment.....by the end of 2000 he had a huge loss.

2014 question

Tonymontana (talk|edits) said:

31 March 2014
Have a client with W2 V amount of $393K.

Have a 1099B that shows $124K. Same day transaction generates a ($50)loss Sch D. Page 2 of the 1099B shows the transaction detail. NQ, Gain, Sales Proceeds, Options Cost, Taxes and check issued to client for $79K.

My question is how do I reconcile back to W2 V amount. The taxes withheld shown on 1099B come nowhere near what Box 2 of the W2 says. Could I be missing a statement? Doesn't make sense. Any help would be appreciated.

Ckenefick (talk|edits) said:

31 March 2014
Code V + Option Cost = Basis.

Death&Taxes (talk|edits) said:

31 March 2014
Are you sure he also didn't receive some Restricted Stock?

Tonymontana (talk|edits) said:

31 March 2014
Am not sure if part of it was Restricted Stock at this point, but I don't think so because he said he received a little more than half of the $393K after tax witholdings. But that doesn't jive with the 1099B that says $79K was issued as a check.

I asked him if I had everything when I met with him and he said yes (but then again they always say yes till you dig deeper).

I emailed him asking for an Exercise Confirmation Statement and detail of the transactions. Am wondering if he Exercised his options but only sold part of it, or if there is a second 1099B.

Riki EA (talk|edits) said:

31 March 2014
One of our clients exercises the options but usually holds onto the stock received. So, the spread shows up in Box V of the W-2 but not on Schedule D for that year -- the shares are just deposited into his brokerage account. Tony, your client may have sold only a portion of the stock received. Another possibility is that your client didn't give you all the 1099-Bs. Sometimes our clients get a separate 1099-B for each stock option exercise/sale, even though it is with the same brokerage and they could in theory send one 1099-B showing the year's transactions.

Tonymontana (talk|edits) said:

31 March 2014
Thanks Riki. Those were my assumptions as well, just wasn't sure if it was possible.

I have a feeling he has a second 1099B. Don't think he's holding the stock because he did say he received just over half of it as a check and there were witholdings, just not enough. I think he's gonna have a hefty tax bill.

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