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ISO disqualified disposition

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TP had ISO (disqualified disposition incentive stock option) in 2018 and received Forms W-2 from TP’s former employer and 1099-B from E-trade (Box A basis reported to IRS: Report on Form 8949, Part I with Box A checked, covered securities).  TP exercised the stock option and sold the shares on the same day in 2018.  

Please assist in clarifying and confirming the following:

How to determine whether Box 1 of Form W-2 already included the bargain element of the stock option (FMV on exercise date less the exercise price)?  

Is it usual to have Form 1099B stating Box A basis is reported to the IRS even though the bargain element is included in Box 1 of Form W-2?   It is my understanding that the bargain element is only included in Box 1 Form W-2 when basis is not reported to the IRS (Form 1099B Box B checked non covered securities).   

AMT Line 2i Form 6251: TP exercised and sold the share on the same day in 2018.  Therefore, no AMT adjustment on line 2i Form 6251 is required.  Correct?

Thank you for your comments.


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How to determine whether Box 1 of Form W-2 already included the bargain element of the stock option (FMV on exercise date less the exercise price)?

  • You should be able to determine that using info from the Form 3921, grant/exercise statements and documents, as well as compensation breakdown/payslips.  You should, however, verify that all the shares sold were acquired through ISO rather than market purchase (as this does happen at times).
Is it usual to have Form 1099B stating Box A basis is reported to the IRS even though the bargain element is included in Box 1 of Form W-2?   It is my understanding that the bargain element is only included in Box 1 Form W-2 when basis is not reported to the IRS (Form 1099B Box B checked non covered securities). 
  • Yes.  ISO's are covered securities.
AMT Line 2i Form 6251: TP exercised and sold the share on the same day in 2018.  Therefore, no AMT adjustment on line 2i Form 6251 is required.  Correct?
  • No AMT adjustment for exersale.
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Still an AllStar

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Highlighted
Level 15

How to determine whether Box 1 of Form W-2 already included the bargain element of the stock option (FMV on exercise date less the exercise price)?

  • You should be able to determine that using info from the Form 3921, grant/exercise statements and documents, as well as compensation breakdown/payslips.  You should, however, verify that all the shares sold were acquired through ISO rather than market purchase (as this does happen at times).
Is it usual to have Form 1099B stating Box A basis is reported to the IRS even though the bargain element is included in Box 1 of Form W-2?   It is my understanding that the bargain element is only included in Box 1 Form W-2 when basis is not reported to the IRS (Form 1099B Box B checked non covered securities). 
  • Yes.  ISO's are covered securities.
AMT Line 2i Form 6251: TP exercised and sold the share on the same day in 2018.  Therefore, no AMT adjustment on line 2i Form 6251 is required.  Correct?
  • No AMT adjustment for exersale.
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Still an AllStar

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@itonewbie Thanks for your time and comments!
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Level 15
NP :+1::+1:
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Still an AllStar
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