[Naini]

Last year I purchased stock from the company I worked for. I live in MA and the company is based out of CA. In May of this year, they had to close the MA office and layoff everyone. I requested that my stock be bought back, since I was laid off and my husband got laid off a month later. I had used equity in my house to purchase the stock. Now it is the middle of Oct and neither my husband or I have found work. So... needless to say, I needed that money to go towards my home equity loan.

Unfortunately, a meeting was held and they were only willing to buy the stock back at 7.50 a share. I had purchased 200 shares at 25.00 each - thus a 5,000 investment.

I would only receive 1,500 back. However, the president, who is a great guy and cares for his employees, past and present stated he would send a check for the remainder amount of 3,500, but had to send it as a bonus and told us we would have to pay taxes on it. Then, something was mentioned that we would need to claim it on a 1099-D (or maybe he was claiming it on a 1099-D). I looked up what a 1099-D was used for and it states dividends and stocks. Well, that doesn't make much sense to me if he is giving it to us as a bonus and we have to pay taxes on it as if we just received it as part of payroll.

[AtlantaTaxExpert]

If he IS giving it as a bonus, the payment should be covered in your W-2.

If he is giving it under a Form 1099-DIV, that is BETTER for you tax-wise, as it will be subject to only income taxes. The FICA taxes (Social Security and Medicare) will not apply.

You will be able to claim the $3,500 loss on the stock on Schedule D. If you have no other capital losses, $3,000 of the loss can be claimed in 2007 against other income; the remaining $500 will be carried forward to 2008 to be claimed then.