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Date:   9 Apr 2008
From:   Tony

My employer split into 2 divisions at which time my options were also split. One division was sold and my options were converted to shares on which I paid taxes. I sold those shares last year at a loss. I understand my (capital) loss is limited to $3,000 per year and can be carried over.

Can I recover the taxes I paid in that prior year since the stock’s value when sold was lower?

Answer

Date:   6 May 2008

Hello Tony,

No.

The only way I can think of that you could is if capital loss carrybacks were allowed for individuals, and they aren’t.

An idea is to establish that the value on the date that you converted the shares (exercised the option) was wrong. That would be very expensive and difficult to prove in light of the division sale.

You only have to look at listed values of shares on the stock market to know that values change all of the time. Tax results depend on values on transaction dates, not later events.

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.