ESPP: Can I enter adjusted cost basis in box 1e (cost basis)?

Forum|Forum|6 years ago
June 1, 2019
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My brokerage (Fidelity) tells me the adjusted cost basis of my ESPP stock sales. Can I just put the adjusted cost basis in box 1e (cost basis)? See attachment for the screenshot.

I sold all stocks within a year anyway, so they are taxed at ordinary income tax rate, right? There should be no difference if I put the adjusted cost basis in box 1e?

TurboTax Self Employed Online

Best answer by TomYoung

Ultimately you're going to report the adjusted cost basis when you report the sale. The "correct" way of doing this is to enter the 1099-B as it reads on the default TurboTax 1099-B entry form but then click on the "I'll enter additional info on my own " blue button. On the next page enter the correct basis in the "Corrected cost basis" box. The correct basis is (number of shares sold) x (correct per share basis, which includes the compensation per share)

TurboTax will report the sale on Form 8949 "as reported by the broker" but will put an adjustment figure into column (g) of the Form, a code "B" into column (f) of the Form, and the correct amount of gain or loss which includes the adjustment.

But as a practical matter simply entering the correct basis right in Box 1e would also work. If you report you taxable income correctly the IRS just doesn't have any leverage over you due to "style."

Tom Young

NOTE: TURBOTAX CHANGES THE SECURITY SALES INTERVIEW JUST ABOUT EVERY SINGLE YEAR. THE INSTRUCTIONS ON "HOW TO FIX" THE BASIS REFLECT THE STATE OF THE INTERVIEW FOR TAX YEARS 2016 AND 2017

TomYoungAnswer

Employee

But as a practical matter simply entering the correct basis right in Box 1e would also work. If you report you taxable income correctly the IRS just doesn't have any leverage over you due to "style."

Tom Young

NOTE: TURBOTAX CHANGES THE SECURITY SALES INTERVIEW JUST ABOUT EVERY SINGLE YEAR. THE INSTRUCTIONS ON "HOW TO FIX" THE BASIS REFLECT THE STATE OF THE INTERVIEW FOR TAX YEARS 2016 AND 2017

MarkW1

Hi - I am still confused on the ESPP cost basis.

Here is an example:

I acquired 278 shares at $11.93 per share. This was an acquired cost of $3317

I then sold the shares 2 years later at $22.97 for a proceed of $6386

My employer reported income gain of $585 on my W2

In turbo tax (box 1e) do I enter my cost basis as $3317 (what I actually paid) or $3906 (adjusted cost basis)?

ie Do I enter the higher number as the compensation gain was already included in my W2?

Thanks

TomYoung

Employee

It seems like this was a disqualifying disposition, assuming your ESPP used the maximum 15% discount allowed; the reported compensation is exactly the 15% discount times 278 shares.

To answer your question, you want to ultimately use the $3,906 basis figure - a number that includes the $585 of compensation reported on your W-2. That will reduce your taxable gain from your "purchase price" basis. If you didn't use the higher basis you'd be reporting the same income twice: once as "compensation" and then again as a phantom "capital gain."