ESPP disposition after stepped-up basis

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  • #7980
    sselm
    Participant

    T sells one share acquired a few years earlier through an ESPP plan — a qualified disposition. The FMV was $100 on the grant date and $120 on the purchase date, the discount was 15%, the purchase price was $102, and the sale price was $150.

    The compensation income would generally be the lessor of:
    (a) 15% of $100
    (b) $150 (sale price) minus $102 (“amount paid for the share”)

    I put “amount paid for the share” in quotes because that’s literally what it says in the tax code.

    Here’s the complication: the share was community propery, and T’s spouse died before the sale. The share got a stepped-up basis from $102 to $140.

    Does this affect the calculation of compensation income? Should T use the $140 stepped up basis as the “amount paid for the share” in that calculation, or keep using $102?

    Thanks.

    #8212
    sselm
    Participant

    One final ping — does anyone have any idea? Thanks.

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