Reporting ordinary income on ESPP sale loss

Forum|Forum|2 years ago
March 18, 2024
1 reply
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I participated in my company's ESPP program for several years. I purchased the stock and held it for over 2 years making it a qualified disposition.

After that the company's stock tanked and I sold the shares at a loss for less than the original purchase price. I received a W2 from the company for the bargain element I received as part of the ESPP program. I read in various places that if the sale is a qualifying disposition and you sell for less than the purchase price then you do not have to report the bargain element as ordinary income.

Can someone tell me if this is true or not? I'm concerned that my past employer reported the income on a W2 so now I have to report it even if I may not have to.

For example:

Purchase 100 shares of ABC stock as part of ESPP program
Current share price at time of purchase was $100
Discounted price was $85 at purchase ($15 bargain element)
Sold shares over 2 years later for $50 a share
I've reported the capital loss of $35 per share
Do I need to report the $15 per share bargain element if I sold for a loss on a qualified disposition?

Best answer by Rick19744

A couple of comments:

If you have a qualifying disposition, and the stock is sold at a loss, there is no ordinary income recognition of the bargain element.
Your facts are not entirely clear, but if the bargain element is included in your W-2, which many times it is, then you need to contact the employer to have them issue you a corrected W-2.

CatinaT1

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tax enthusiast 2024Author

This was not an answer, yes I still need help. The software is not helpful at all.

Rick19744Answer

Employee

A couple of comments:

If you have a qualifying disposition, and the stock is sold at a loss, there is no ordinary income recognition of the bargain element.
Your facts are not entirely clear, but if the bargain element is included in your W-2, which many times it is, then you need to contact the employer to have them issue you a corrected W-2.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.