Question: Tax consequences of Sale of Stock?
I am looking for information regarding the tax consequences and reporting for the Sale of Stock acquired through an Employee Stock-Ownership plan. I've been searching through the IRS site, found lots of info, but haven't found the "right" info that applies to this situation.
I know I'm not the first person ever to do this, so hopefully SOMEONE out there has done this and can point me to the right info.
(And no, suggesting that I hire a tax expert isn't help. I am asking for help RESEARCHING the answer.)
Answer:
I'm not 100% sure what you're looking for. Does this answer your question?
"Tax Treatment of ESOP Benefits
Employees pay no tax on stock allocated to their ESOP accounts until they receive distributions; at that point, they are taxed on the distributions. If they are younger than age 59 1/2 (or age 55 if they have terminated employment), they, like employees in qualified plans generally, are subject not only to applicable taxes but also to an additional 10% excise tax unless they roll the money over into an IRA or a successor plan in another company (or unless the participant terminated employment due to death or disability). Certain lump-sum distributions from an ESOP may be eligible for favorable income averaging and/or capital gains tax treatment.
If the money is rolled over into an IRA or successor plan, the employee pays no tax until the money is withdrawn, at which point it is taxed as ordinary income. Rollovers from ESOP distributions to IRAs are available for distributions of stock or cash over periods of less than 10 years.
When dividends are directly paid to plan participants on the stock allocated to their ESOP accounts, such dividends are fully taxable, although they are exempt from income tax withholding and are not subject to the excise tax that applies to early distributions."
http://www.nceo.org/library/esop_tax_law…
Publication 544. use Schd D. The company broker should give you a 1099 report for your " Cost basis".
The sale of stock is a taxable event, because you have realized a gain or loss.
If you made a profit, the profit is taxable.
If you took a loss, the loss is deductable.
If you held the stock for under 1 year, it is taxed at the short term capital gains rate, a higher rate.
If you held the stock for over 1 year, it is taxed at the long term capital gains rate, a lower rate.
If you took a loss, it does not matter how long you held the stock.
Generally, in Employee Stock Purchase Plans, when the company offers the stock at a discounted rate, that discount may count as income if sold too soon. The law is rather vague here, and I made sure I held all my ESPP stock at least 2 years just to be on the safe side.
I don't know a ot about this subject, but I do know of one tax lawyer who knows more about it than most tax lawyers. His name is Kaye Thomas.
Part of his website is dedicated to "Compensation in Stock and Options".
http://www.fairmark.com/execcomp/index.h…
If you don't find the answer you need there, I can tell you that as of the last time I used the site message board (years ago) he still answered questions himself on the message board when needed. I assume he still does.