Taxable account cost basis - ESPP

[Sibley]

My brain hurts and I need a double check please. Trying to figure out the cost basis of my dad's taxable account. Have this table from the most recent statement available. It's specific ID (of course), and I'm thinking I need to use the "Purchase Price" column, not the "Purchase Price FMV" column to calc (along with Shares Purchased). Employee stock purchase plan. Really wish my dad hadn't done this, but he wouldn't listen. At least it's not a massive amount.

[MDM]

Was the difference between the FMV and purchase price included in his W-2 for the applicable year?

See Employee Stock Plan Taxes: Understanding Taxes on Stock Plans - Fidelity (you'll need to know whether this is a "qualified" or "non-qualified" ESPP - both are common), and
Your 1099-B form for an ESPP sale will probably be wrong.

[seattlecyclone]

We have an old thread about this. See also IRS Publication 525.

Assuming this plan meets the qualifications for a tax-advantaged ESPP, the older shares (the ones with a grant date before today's date in 2019) have met the required holding period. These have cost basis of the "subscription date FMV" column. The difference between your sales price and that FMV will be a capital gain, and the difference between that FMV and the amount actually paid for the shares counts as wage income at the time of the sale. The company will generally want to be informed about the sale so that they can issue a W-2 accordingly.

The newer shares (the ones with a grant date after today's date in 2019) have not met the holding period yet. In this case the purchase date FMV will be the cost basis for determining capital gains, and any discount off this amount counts as wage income.

[Sibley]

Thank you! Yes, I believe the W-2 was impacted, I can dig them out and confirm. I have at least a few handy. He's retired, so no more W-2s to issue.

There's no harm probably in letting things sit for a while, but I'll read up and figure out what makes the most sense for them.

[seattlecyclone]

For the qualified plans the W-2 would come in the year you sell the shares, because the wage component depends on whether you meet the holding period or not, and if you did meet the holding period it depends on whether the sale price is higher or lower than the purchase price. That information is impossible to know at the time you buy the shares. Even though he's retired he still might have a W-2 coming!

[VaCPA]

Subscription price is probably irrelevant. Looks like that's just the price at the beginning of the period, because in most cases it matches the FMV purchase price of the previous period.

There's a 15% discount between purchase price FMV and purchase price. My wife is in an ESPP that also gets a 15% discount. Her discount is shown on the W-2 every year in box 12, code V. The 1098 I receive from the brokerage when I sell shares doesn't factor this in and lists the tax basis incorrectly(as purchase price), so I always have to make an adjustment on my tax return and add in the discount, essentially making the basis purchase price FMV.