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Date:   Mon, 25 Feb 2008
From:   David

I exercised non-qualified stock options for 40 shares of stock. The ordinary income was included in wages on my W-2 form. Do I still need to report the sale on Schedule D?

Answer

Date:   14 Mar 2008

Hello David,

If you received a Form 1099-B for the sale, you still need to report the sale on Schedule D. Add the ordinary income included on your W-2 to the option price to compute to tax basis or "cost" for Schedule D, which should eliminate the gain on that form. If you don’t report the sale, the IRS will probably send you a letter saying you underreported your income.

Good luck!

Mike Gray

For more information about non-qualified stock options, request our free report, Non-Qualified Stock Options - Executive Tax and Financial Planning Strategies.

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.