Question

I need to know how to calculate cost basis for stock sale. How do I calculate cost basis if I exercised my company stock options?

Answer

Your basis in the stock depends on the type of plan that granted your stock option.

Regarding how to how to calculate cost basis for stock sale, you calculate cost basis using the price you paid to exercise the option if both of these are true:

  • The plan was an incentive stock option or statutory stock option.
  • The stock is disposed of in a qualifying disposition.

If the stock was disposed of in a nonqualifying disposition, the basis is the sum of these:

  • Option price
  • Any income reported on your W-2 as a result of the disposition

If the plan was a nonstatutory stock option, your basis is the sum of these:

  • Price you paid for the stock
  • Any ordinary income reported on your W-2 when you exercised the option

 

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