RSA: Determining actual cost basis of long term gain with cost to cover tax method when granted

Forum|Forum|3 years ago
February 22, 2023
2 replies
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In 2019, 333 RSA shares from my public traded company vested @ $28.14, for a total market value of $9,370.62, which was recorded as income in 2019. 99 shares were sold by the company at time of vest to cover the $2,785.40 of income taxes. This left me with 234 shares ($6,584.76) in my stock account.

I sold the 234 shares in 2022. Do I use the $9,370.62 or the $6,584.76 as my cost basis? (Using the $6.584.76 feels like I am being double taxed on any gain for the $2,785.40 I already paid for taxes as that is a loss to me.) My 1099-B for 2022 shows cost basis as 0 since these are listed as long term-non covered.

Mike9241

the 99 shares sold should have had a tax basis equal to the income they added to your W-2. 99* $28.14 ($2786) so there would be no gain or loss on them. thus your tax basis on the remaining shares is 234*$28.14 ($6585). the taxes paid with the sale of the 99 shares does not affect the tax basis just as normal withholding taxes taken out of your paycheck does not affect taxable wages.

the withholding of the $2786 reduced the amount you owed on the $9K+ of income

mustangguy289Author

Thank you, although I was hoping to hear the alternative.

GeorgeM777

Your basis in the shares you sold is $6,584.76. Your company sold some of your RSUs, as you correctly noted, to cover your tax withholding obligations.

Your 1099-B may reflect a zero cost basis because the broker did not know your basis and thus, the broker entered a zero for the cost basis. However, you can make the appropriate adjustment to basis in TurboTax so that your gain/loss will be accurate.

@mustangguy289

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mustangguy289Author

@GeorgeM777 thank you. The value per share was $28.14 at time of vest. I did find a supplement document on my e*trade where it shows the cost basis at the lower value $6,584 as it is only considering the 234 shares available to sell, since the other 99 were sold at time of vest to cover tax. This document is not an official IRS form and has explanations that it may not be fully accurate. This is all very confusing and for the first time in 21 years am considering paying someone to do my taxes because of this. ( I have 6 years worth of vested RSA's that I sold in 2022 and just using one as an example for this advice request.)