Handling ESPP wash sale in Turbotax

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cliffedelgado
Posts: 105
Joined: Fri Apr 16, 2010 1:52 am

Handling ESPP wash sale in Turbotax

Post by cliffedelgado »

Looking for some advice here regarding reporting an ESPP wash sale in TurboTax.

Sold around 12/28/2010. New lot came in 1/3/2011. The sell was above my buy price, but below the FMV on the purchase day, so there was +W2 income but also some short term capital loss.

I tried to input it into Turbotax but it did not ask about wash sales for ESPP. I see it does ask about re-buying for regular investments.

1) Any advice on how to handle this in Turbotax?
2) Can anyone confirm if there was indeed a wash sale? (Most sources say yes, one source on intuit.com claims no. I think it's yes)
Penguin
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Joined: Sat Mar 03, 2007 12:52 pm

Post by Penguin »

Here is how turbotax handles wash sales:
http://turbotax.intuit.com/support/iq/I ... 12387.html
I am confused how you could have a capital gain and a capital loss at the same time, so I don't know if you had a wash sale. Perhaps if you list the actual price per share that you paid when you bought and received when you sold it may help to answer your question.
Jon
Topic Author
cliffedelgado
Posts: 105
Joined: Fri Apr 16, 2010 1:52 am

Post by cliffedelgado »

In my ESPP, we get a discount of 15% on the lower of the offering date and purchase date price.

This link can show you some examples, though they don't explicitly show example of disqualifying disposition with capital loss.

http://turbotax.intuit.com/tax-tools/ta ... 12047.html

Some example prices that would result in this situation:

Purchase price: 15
FMV on purchase date: 25
Sell price: 22

Thanks for the link. Unfortunately, that screen only shows up for regular investments and not for ESPP.

Added: Here's a pdf, page 7 shows my example. https://content.etrade.com/etrade/optio ... spptax.pdf
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BruceM
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Location: Manzanita, Oregon

Post by BruceM »

cliffedelgado wrote:In my ESPP, we get a discount of 15% on the lower of the offering date and purchase date price.

This link can show you some examples, though they don't explicitly show example of disqualifying disposition with capital loss.

http://turbotax.intuit.com/tax-tools/ta ... 12047.html

Some example prices that would result in this situation:

Purchase price: 15
FMV on purchase date: 25
Sell price: 22

Thanks for the link. Unfortunately, that screen only shows up for regular investments and not for ESPP.

Added: Here's a pdf, page 7 shows my example. https://content.etrade.com/etrade/optio ... spptax.pdf
Per the. Pdf example, your basis will be what you paid plus your disqualified disposition that was added to your W2 as ordinary income. Since you sold the shares for less than your basis, you will have either short or long term capital loss, depending on how long you held the shares. If you then purchase identicall shares within 30 days, you'll have to give up the capital loss and use the loss amount to adjust the basis of the shares you purchased..

How exactly you do this in TT, not sure, but I can't see why it would be any different than any other wash sale.

Now having said that, I'd suggest you post this question on one of the tax-prep boards where tax preparers hang out, such as 'Quickfinder' or Fairmark

BruceM
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jpsfranks
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Post by jpsfranks »

I think TT "Premier" may have guided ESPP help. At least that was the impression I got when I first tried to handle my ESPP in TT.

I've never purchased Premier so always end up doing it myself. It's a pain, particularly since under my plan you are awarded fractional shares but can only sell whole shares, which, together with reinvested dividends leaves lots of tiny fractional cost bases to account for.
Topic Author
cliffedelgado
Posts: 105
Joined: Fri Apr 16, 2010 1:52 am

Post by cliffedelgado »

Thanks for looking into it BruceM and jpsfranks.

I think I'll just treat it as a regular investment and not as an ESPP sale. The Turbotax ESPP guide is unable to take into consideration wash sales. (I'm using the Home & Business version) So the ESPP guide is useless in this regard.

Going ahead with treating it as a regular stock sale. I entered the basis as my purchase price + W2 income part. This then leaves the correct capital loss. Entering the wash sale info then correctly nullifies the loss. (note: exactly what BruceM suggested)

Hope this will help others as well.
mesutter
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Joined: Tue Mar 15, 2011 3:34 am

Post by mesutter »

I don't believe Turbotax (I'm using premier desktop for the Mac) has the capability to calculate wash sale loss disqualification/ deferral. Turbotax premier has no problem handling ESPP transactions relating to identifying and correctly calculating compensatory income resulting from ESPP stock sales, both qualifying and disqualifying. as well as the residual long-term or short term capital gain. It also has provision for calculating wash sale deferral of losses on ordinary stock sales.

After literally hours on the phone with 5 different Turbotax support persons, I have concluded that Turbotax cannot properly calculate wash sales on ESPP stock. I even went into the forms mode and directly entered my wash sale info into block 11 of the worksheet, clicking on the box to indicate a wash sale, then entering the number of shares purchased during the wash period on line 11 a (3), but to no avail. The calculated gain continued to under-report my gain by the amount I had independently calculated as disallowed by the sale. The last TurboTax manager I worked with confirmed this shortcoming when he attempted to create a dummy ESPP wash sale and found the same problem.

Incidentally, my company's stock agent, Fidelity, is also miscalculating (and over-reporting) wash sale disallowed losses, as I confirmed by reading the criteria in IRS pub 550 (page 59) and confirming it with two separate IRS phone support persons specializing in the area of complex financial issues.
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