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February 18, 2021
Question

Received some stock as a bonus from my company. It had to vest before it could be sold. What type of investment would this be for tax purposes? ESPP, NQSO, ISO, RSU, RS?

  • February 18, 2021
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February 18, 2021

It may not be any of those.  The closest thing based on information you have provided would be Restricted Stock.  Restricted stock refers to unregistered shares of ownership in a corporation that are issued to corporate affiliates, such as executives and directors. Restricted stock is non-transferable and must be traded in compliance with special Securities and Exchange Commission (SEC) regulations.  Even though it may not actually be RS, it would be taxed  much the same.  

 

Once the stock has vested, the fair market value of the stock gets reported as ordinary income, usually in box 1 of your W-2.  After vesting, you own the stock outright. Should you later sell those shares, you'll get a 1099-B which will report the gain or loss from the sale.  

 

When you sell the stock, your basis is the amount that was included in your income.  This usually is not reflected on Form 1099-B, so the basis has to be adjusted to avoid paying extra tax.  If the income wasn't reported on your W-2, you will have to report ordinary income, as well as a capital gain or loss.

 

Without knowing more about your situation, its hard to say exactly how your stock sale would be treated.

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