Do I need to report stock from a privately held company?
August 22, 2011
Subject: Is any tax due at vesting of NQ stock options
Date: Sat, 12 Feb 2011
I left my privately-held employer in 2010 and purchased my vested shares for $5,200. (43,000 shares at 12¢ per share.) However, as the company is privately held, they have no real value right now. Do I need to declare this stock on my income tax returns?
The item is only reportable if the fair market value of the stock exceeds the option price. You should have received some reports from your company about what the fair market value of the stock was and the reportable amounts.
If the options were nonqualified stock options, the income (for the excess of the fair market value of the shares over the option price) should already be reported on your Form W-2.
If the options were incentive stock options, the excess of fair market value over the option price is reported on the Alternative Minimum Tax Form, Form 6251.
See the Gudmundsson case above. Most restrictions are disregarded in determining whether stock received as compensation is taxable.