Company Stock Plan sale

[schildi]

Hi all!
Quick question: we have a plan at work where we get company stock annually that vests over a period of time (RSU's). Last year, I ended up selling from 5 different groups, all within a two week period. So basically, there should be 5 buy and 5 sell transactions on my return, right? Buy from when I "acquired" the stock, and the sell the same day or a day later.
Now here is the question: on most of them, there was a small (paper) loss, like < $100 total after summing all up. Now does this count as a wash sale as all happened within 2 weeks? I never really bought stock the conventional way though ...

Any help is highly appreciated!

[chiver78]

uh...I have no clue. but if you use e-trade or something else online, everything is definitely clearly defined on the forms that they will send you.

I have RSUs too, we switched from options a few years back. 2010 was the first year any vested, so I'll be dealing with this myself. I think the way it works is that there are enough sold to cover the taxes on the lot of them, and you are then 'gifted' the rest. that's the way it was explained to me, anyway.

don't know if that helps you at all....

[schildi]

Chiver, it did not really help much. Thanks for replying anyway, though!
The main question is if this is considered a wash sale, because there is always a difference between the "buy" or "gift" price and the sale price. Hmmm, I hope somebody will chime in and help both of us ... !

[chiver78]

see, the way I understand it is that it doesn't matter what the "buy" price is because you are covering your capital gains tax between the "buy" and "gift" prices by the RSUs that get sold the day they all vest. you are gifted the rest at the current rate, and any later sale gets you all of the proceeds. it's not like a straight-out option that you need to cover the difference.

anyone? am I misunderstanding this?

[schildi]

If I understand you correctly, then I believe you misunderstand.
There is a vest date. On that date, you are "gifted" the stock or "buy" is or whatever. There is a price on that day, and stock is withheld / sold to cover tax on that day / at that price. That price should be the cost basis. But then there is the sale price (if you sell), which is almost always different from the "buy" or "gift" price. And that difference between the cost basis and the sell price is a taxable income or loss. That's how I understand it, anyway ....

[chiver78]

oh, I see what you're asking now. I think we were saying the same things, but just a bit differently. like I said, this is new to me too.

the units that are sold the day of vest cover the taxes for the gift that day. you're right about the cost basis thing, and that's what's used to calculate the taxes for the sale, whenever that is. if you sold at(or near) the same price as the cost basis, I think you're going to be looking at negligible taxes or loss, depending on the direction.

[mwcpa]

this is not a wash....

you exercised the grant provided by the employer... and liquidated it... you did not hold the stock... wash losses come into play when within a 30 days period (before or after) you buy the same security you sold.... since you are not continuing to hold the stock there is no wash....

generally there will be an amount in your W-2 for the "value" given to you by your employer... example, you could buy X shares at $10.00 and you exercise your rights when the stock is $50.00... the $40.00 spread is included in your W-2 and taxes are due... since you have no cash in this transaction the company allows you to sell the X shares at 50.00 (less the stock brokers fee)... you get the difference...

This is two transacitons... part in your W-2 and a capital gain/loss transaction with the cost equaling the cash you plaid plus the amount included as income to you... I wish I could count the times clients do not give me the "1099-B" from the sale and 2 years later get a CP-2000 notice from IRS asking for tax on the proceeds... of coarse it's always my fault when this happens...

[schildi]

Thanks, mwcpa.
I think I am doing this correctly then. These are not options, btw, but RSU's (restricted stock units), but the math should be the same, I think.
Here is an example: there is 90 shares of RSU's that are vested. The company uses 30 to cover taxes and sells the other 60 and sends the proceeds to me. If the stock on the day of vesting was at $100, then my W-2 will include additional income of $9,000 (=90*100), while also including the extra tax payment of $3,000 (=30*100). Now, when I do the automatic sale, and the shares are sold the next day when at $101 (stock went up 1%), then I need to report $6,060 (=60*101) as total proceeds of that sale with $6,000 (=60*100) as the cost basis for the stock transaction. Or, in other words, I will have to pay tax on the extra $60 of income.
I hope that was somewhat clear. :-)

[mwcpa]

you got it a little wrong....

the "income" reported by the company is 90 shares * $100 = $9,000.00 (this will be on the W-2)
the deemed sale is two transactions...
first, 30 shares were "sold" to cover the tax, that's 30*100 (assuming your price), the cost is the same, so no gain or loss, but you will get a 1099-B for the 3,000 sale
second, 60 shares were sold at 101 or 6,060 (I assume the 101 is net of broker fees) your cost is 6,000, you will have a short term gain of $60.

You need to look for the 1099-B on both trades.... while your boss "kept" the 30 shares, he really did not, he sold them for you since you did not have the cash to pay the tax.... I have had clients in the past have the cash and keep the shares...

[schildi]

Jan 27, 2011 18:49:44 GMT -5 mwcpa said:

you got it a little wrong....

the "income" reported by the company is 90 shares * $100 = $9,000.00 (this will be on the W-2)
the deemed sale is two transactions...
first, 30 shares were "sold" to cover the tax, that's 30*100 (assuming your price), the cost is the same, so no gain or loss, but you will get a 1099-B for the 3,000 sale
second, 60 shares were sold at 101 or 6,060 (I assume the 101 is net of broker fees) your cost is 6,000, you will have a short term gain of $60.

You need to look for the 1099-B on both trades.... while your boss "kept" the 30 shares, he really did not, he sold them for you since you did not have the cash to pay the tax.... I have had clients in the past have the cash and keep the shares...

Thanks mwcpa. Yes, $9K would be reported as income in the case above.
The $3,000 in tax are also included as tax paid by me on my W-2.
And on my return, I am only listing the second stock transaction, the one with the $6,060 proceeds, as the first one is incuded in my W-2.
I just double checked my 1099's from last year, and I did not get a 1099-B at all (ever, actually). I got a consolidated 1099 that only lists the second transaction (the sale for $6,060 in the example). I checked with the brokerage online, and it's the same.
These are not stock options, maybe that makes a difference? In this case here, there is no option price to cover, the value of the entire share is mine (ex. if the stock is at $100, I get $100, minus tax).

[schildi]

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What was that? A duplicate suddenly popped up.