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ISO disqualifying disposition

Revere
Level 3

Im new at this ISO disqualifying disposition, where do I enter it, just as a  other income? Thank you

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itonewbie
Level 15

The bargain element should have been reported in Box 1 of the W-2, failing which the employer can't take a corporate tax deduction.

That compensation would form part of the basis and would normally have been captured on the 1099-B by the custodian brokerage.

Double check the compensation breakdown and ISO exercise/sale statement to verify the above.

As far as tax reporting goes, the sale of stocks acquired from ISO, whether or not the disposition is qualified, it's done the same way on Sch D/F.8949 like any other stock transactions.

If your client was subject to AMT previously for the exercise of ISO, there may now be an MTC.

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Still an AllStar

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itonewbie
Level 15

The bargain element should have been reported in Box 1 of the W-2, failing which the employer can't take a corporate tax deduction.

That compensation would form part of the basis and would normally have been captured on the 1099-B by the custodian brokerage.

Double check the compensation breakdown and ISO exercise/sale statement to verify the above.

As far as tax reporting goes, the sale of stocks acquired from ISO, whether or not the disposition is qualified, it's done the same way on Sch D/F.8949 like any other stock transactions.

If your client was subject to AMT previously for the exercise of ISO, there may now be an MTC.

---------------------------------------------------------------------------------
Still an AllStar

View solution in original post

Revere
Level 3

Thank you for your reply, I saw it the amount on W-2 and also for 1099B Charles Schwarb, the amount is a bit different, I should follow 1099B numbers?

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itonewbie
Level 15

It is expected that the numbers on the W-2 and 1099-B will be different.

What gets reported on the W-2 is the bargain element only.

Assuming that the Box 1 amount for the disqualifying disposition of ISO is already picked up by Charles Schwab, the basis reported on the 1099-B should include both the option price and the bargain element.

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Still an AllStar
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Revere
Level 3

Thank you so much, now I just need for 8915E to be finalized for other clients.Thank you again.

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itonewbie
Level 15

NP, @Revere.  Have a great day!

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Still an AllStar
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