How should I fill out my tax forms for NQSO stock?

October 10, 2014

Date:   Tue, 21 Aug 2007
From:   Arun


I’m a new subscriber with a question about Schedule D for the sale of NQSO stock.

Date acquired – 8/22/02; date sold 4/28/05.

Sale price $38,000; cost – $20,000; Gain – $18,000.

The $18,000 gain was reported on Form W-2. I received a 1099-B for the $38,000 sales price. How do I avoid also reporting the gain again on Schedule D?

Thanks a bunch for your advice.



Date:   12 Sep 2007

Hello Arun,

I take it the “date acquired” is the grant date for the option, and that you exercised the option and sold the stock on 4/28/05.

Looks like you’re behind in filing your income tax return. I highly recommend that you keep current to avoid late filing penalties.

Since you have reported taxable income of $18,000 as part of your W-2 wages, you get to add that amount to the grant price of $20,000 for a total tax basis (cost for determining gain or loss on sale) of $38,000. Therefore, the gain reported on Schedule D would be zero. You might actually have a small loss for transaction costs subtracted from the sales proceeds reported on Form 1099B.

You could have found this information by searching our site, or by reading our free report, Non-Qualified Stock Options – Executive Tax And Financial Planning Strategies.

Best wishes,

Mike Gray

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

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