Personal Finance (Not Investing) • ESPP taxation: is negative income possible on W2?

[1] includes a link to IRS Pub. 525 [2], which seems relevant to your situation:

"If, at the time the option was granted, the option price per share was less than 100% (but not less than 85%) of the FMV of the share, and you dispose of the share after meeting the holding period requirement, or you die while owning the share, you must include in your income as compensation the lesser of:
- The excess of the FMV of the share at the time the option was granted over the option price, or
- The excess of the FMV of the share at the time of the disposition or death over the amount paid for the share under the option."

My read on why you do not need to report Ordinary Income is because the price per share you paid was not less than 100% of the FMV of the share, you do not need to include it in your income as compensation. Your Ordinary Income is floored at $0 so that it cannot be reported as a negative income, and everything gets counted towards the Capital Gain ($120 - $68) * # shares.

[1] https://money.stackexchange.com/questio ... d-discount
[2] https://www.irs.gov/publications/p525

Statistics: Posted by train12 — Sat Dec 30, 2023 2:15 am — Replies 12 — Views 560

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