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Date:   19 Jan 2009
From:   Carl

Mike,

I exercised a same day sale of 500 shares of company stock. The fair market value was $35 per share and the option price $20 per share. What is the tax basis of the shares? How do you handle the selling expenses?

Answer

Date:   4 Mar 2009

Hello Carl,

The tax basis of the shares is $35 per share because you should have reported ordinary income when you exercised and sold them. The brokerage companies usually report the sale price net of selling expenses on Form 1099-B.

Good luck!

Mike Gray

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.