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Adjusted basis of employee restricted stock

February 01, 2017 • Anonymous • Log In to Post Comments

I have a client who received employee restricted stock as performance bonus.  The company annouced the amount of bonus granted to him first and then converted the amount to number of shares based on the company stock price on set date.  When the restricted stocks were vested, the company issued the shares to him after deducting certain number of shares for tax withholding. The company included total bonus amount (before tax) in his wages on his W-2 so as tax withdrawl amount. For this case, how do we calculate the cost when my client sold his restricted stock. Should we use bonus amount before tax or after tax?  





For restricted stock units (RSUs), they are taxed as ordinary income when exercised and included in your client's W-2 income.  You should review your client's W-2s for the year(s) in which the RSUs were excercised and look for the detail that shows how much of his compensation is attributable to the RSUs.

For example, your client's W-2, box 1 might show $200,000 of compensation, but on supplemental detail that technically is not part of the W-2, it should show how much of the $200,000 is from the RSU.  For example, if the RSU was valued at $40,000 and included as part of the $200,000, then your client's basis in the RSUs is $40,000.

This may take a little research and it may be easiest for your client to ask the payroll department at his employer for a breakdown of income they reported for his RSUs.


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