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    collegian's Avatar
    collegian Posts: 57, Reputation: 1
    Junior Member
    		  
    #1

    Apr 1, 2018, 03:34 PM
    Do I need to make cost basis adjustment on ESPP sale of stock?
    Hello,
    I filed my taxes recently and just reported the cost basis as given by the plan broker and ended up owing money to the IRS. I read online that the cost basis might need to be adjusted. What exactly does adjustment mean in this context? Is it adding the adjustment to the existing cost basis provided on broker's 1099?

    I found in the stock plan document that: Ordinary Income = Market value on the last day of purchase period - Purchase price under ESPP
    and: The employee's cost basis of the stock will be increased by the amount of the ordinary income recognized by the employee.

    I sold ESPP stocks after holding them for an year and the sale was reported on W-2. Does this mean that I can add the ordinary income to the existing cost basis? Please advise.

    Thanks!
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #2

    Apr 1, 2018, 04:06 PM
    Many times with ESPPs, the discount is added to your salary as compensation. The amount of discount that is added to your salary must therefore be added to the basis, reducing your capital gain.

    Add the amount that was added to your W-2 income to the basis and see how it affects what you owed the IRS. If the difference is significant enough, it may be worth the effort to amend the return.
    collegian's Avatar
    collegian Posts: 57, Reputation: 1
    Junior Member
    		  
    #3

    Apr 1, 2018, 05:59 PM
    Thanks! I'll give it a go.
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