AMT and Equity Compensation
Alternative minimum tax, nonqualified stock options, incentive stock options and other forms of equity compensation.
ESPP - Compensation income
Posted by: specpc, October 27, 2015 09:58PM
Thank you for providing this service.

I'm reviewing stock recently sold that was acquired through an ESPP plan. However, after reviewing data provided by the employer, it appears that all grants ended with the stock being purchased with a 15% discount to the FMV at the end of the offering period regardless of whether the price was lower at the beginning of the period.

In that case, when calculating compensation income, does the FMV at the beginning of the offering period matter?

How do I calculate compensation income and cost basis?

Also, it may be worth noting that all shares were sold at a profit from the actual purchase price (discount included) and from the price before the discount.

So compensation is the lessor of the amount of your profit or FMV at the beginning of the offering and the option price based on the FMV at the beginning. Right? The company does not provide a FMV at the beginning of the offering period and there were no share purchased at a price based on the beginning price. All shares were bought at the FMV at the end of the offering period less 15%.

Thank you in advance for any guidance.

Re: ESPP - Compensation income
Posted by: triad, October 28, 2015 03:51AM
Your employer will issue you a form 3922 to assist you in filing your taxes.

Re: ESPP - Compensation income
Posted by: specpc, October 30, 2015 03:13AM
The grants were made in 2005 and 2006. Is the employer required to issue a Form 3922 for grants that old?

Re: ESPP - Compensation income
Posted by: Kaye Thomas, November 9, 2015 02:00AM
No, you should not expect to receive this form for grants that old. The best way to obtain the information is from the company's stock plan administrator or HR department, if they'll respond. If you get nowhere with them, it would seem you need to know the value of the stock at the beginning of the offering period. If you can figure out what date was the beginning of the offering period, and the company was publicly traded as of that date, you can get the stock value from Yahoo Finance historical prices (I'd probably use the closing price for that date unless the company says otherwise).

Then, based on what you've said, it appears that the compensation portion is the lesser of (1) 15% of the stock value at the beginning of the offering period, or (2) your actual profit when you sold the shares.

Kaye Thomas
Fairmark.com

Re: ESPP - Compensation income
Posted by: specpc, December 2, 2015 04:40PM
Thank you



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