Do I have to pay ordinary taxes at exercise and report gains on Schedule D?

February 21, 2000

Subject:   Pls Help
Date:   Tue, Feb 1 2000
From:   Anonymous

Thanks for taking my question! I’m currently doing my taxes and have run into some difficulty as far as my NSO stock option goes. I exercised a non-qualified stock option this year and paid ordinary taxes at the time it was exercised. I just received a 1099-B from the broker which reflected both gross proceeds and taxes paid. I also received my W-2 which included the NSO as ordinary and taxes. Since I paid ordinary taxes when the option was exercised do I have to report gains on the Schedule D as well?

Thanks so much for your help.


Date:   9 Feb 2000

You add the amount of ordinary income reported on Form W-2 with respect to the exercise of the option to the option price to compute your total basis in the stock. Depending on how the fair market value of the stock was determined, you may or may not report zero as the gain or loss, but you should report close to zero.

Maybe you should get some help to prepare your tax returns.

Good luck!

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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