Dear Sir/Madam,

I request you to kindly provide me some clarification on the treatment of Vested and Unvested Portion of Stocks on a US Individual Income Tax Return.

1.Company X has offered some stock options to few of its Employees few years back and the same has been bought back by the company during the relevant tax year. i.e. the Unvested Portion has been bought back by the company. Tax has been deducted on the Gross Income and the Net Income has been computed accordingly. This all happened outside US i.e. in another country. Now, what should be treatment on the US Individual Income Tax Return, if the taxpayer is a GC holder and has the obligation to report the global income?

Should that income be reported as Compensation Income on Substitute W-2 or Capital Gain Income on Shcedule D of Form 1040. In any of the cases, we would be taking Foreing Tax Credit on Form 1116. Please advice.

2. What is the treatment to be accorded for the Vested Portion if the Company X had converted the options to Shares and the same were parked with the Company itself.

Please clarify.

This is a complex tax issue that requires extensive research into the tax code.

It is NOT an appropriate question for this kind of forum using hypotheticals, because the status of the company in question must be researched as well.

Assuming this is NOT a homework question, you should contact a competent tax professional to do the research and analysis and provide a detailed answer in writing.