stock options

[TAXMAN]

Here are the facts: 2003 stock option-Exchange Existing Shares for Options

2003 option available- [email protected]

FMV per share@7/29/05=51.78

Surrendered Cert No.11147 (77 shares (cost 1585.00))

77 shares x 51.78=$3987.06

3987.06/17.975=221.81(rounded to 222 shares to be issued

222 option shares x 17.975=3990.45

77 cancel shares x 51.78 =3987.06 =Cash due 3.39

In looking at TP 05 return no ISO or Schedule d showing any of this. TP now wants to sell these 222 shares. I think basis is $1585.00 + 3.39 =1588.39. I even checked his W-2 for that year(05)and Wages were not grossed up for the difference.

Would you agree with me? Thanks

[joanmcq]

ISOs shouldn't be reported on the W-2 in the year issued; they create AMT, but not regular income tax. They are likely qualified sales by now (I'm a bit rusty on options at this point), and would only generate capital gain. Both the Quickfinders and Tax Book have good sections on the treatment of options.

[mcb39]

I don't understand the reference to the year 05. Stock options are reported and taxed in the year they are exercised. Proper reporting should be done by employer. I am rusty on this too as I haven't done one for a while, but you never know when one will pop up.