Disqualifying disposition iso w-2

An employee makes a disqualifying disposition of stock acquired under an incentive stock option ISO or a qualified employee stock purchase plan ESPP when he sells the shares before the end of the required holding period, which is two years from the grant date and one year from the date of exercise.

A disqualifying disposition deprives an employee of otherwise favorable tax treatment. In some cases, however, you may not be able to use the capital loss from your sale. If that happens, you may be taxed on income that exceeds your profit, or even pay tax when you have an overall loss. Beginning with the tax year, companies are also required to provide Form , giving other numbers you may need. If you sold the shares instead of making a different kind of disposition, such as a gift , you should also have Form B, which reports your proceeds from the sale.

Your compensation income from ESPP shares in a disqualifying disposition is the value of those shares on the date of purchase minus the amount paid for them. In a disqualifying disposition of ESPP shares bought at a discount, you must report compensation income even if the stock value went down before you sold the shares, leaving you with a loss.

Hypothetical examples contained herein are for illustrative purposes only and do not reflect, nor attempt to predict, actual results of any investment. The information contained herein is taken from sources believed to be reliable, however accuracy or completeness cannot be guaranteed. Please contact your financial, tax, and legal professionals for more information specific to your situation.

Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Past performance is no guarantee of future results. Talk to your financial advisor before making any investing decisions.

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Key Points A qualifying disposition requires that the final sale of ISOs occurs at least two years after the grant date, and the final sale of the ISOs occurs at least one year after the exercise date. The fair market value at exercise minus the exercise price multiplied by the number of options exercised equals the bargain element.

Thanks TomYoung! Looks like this info is just what I need. Not applicable. Non-Qualified Incentive Stock Options. Yeah, sometimes you have to make sure.. A W-2 would only be issued if it was an ISO. He also specified situation It was an ISO that was sold less than 12 months from it was exercised, which made it a disqualifying disposition.

The exercise and hold took place in , and I did pay quite a bit in AMT for the tax year.