Cost basis of shares from converted RSUs

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MichaelRpdx
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Cost basis of shares from converted RSUs

Post by MichaelRpdx » Tue Dec 26, 2017 6:19 pm

A few years ago my employer granted every employee a block of corporate equity in the form of Restricted Stock Units. As they vested they were converted to shares of common stock and some of the shares sold to cover the tax liability. This past year I completed my vesting and had a small holding of stock.

I sold the holding. What is my cost basis? The price at the time of conversion from RSU to common shares? The price at the time the RSUs were granted?
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fabdog
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Re: Cost basis of shares from converted RSUs

Post by fabdog » Tue Dec 26, 2017 6:21 pm

the price at the time they vested and were available to you to hold or sell

Mike

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MichaelRpdx
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Re: Cost basis of shares from converted RSUs

Post by MichaelRpdx » Tue Dec 26, 2017 6:26 pm

fabdog wrote:
Tue Dec 26, 2017 6:21 pm
the price at the time they vested and were available to you to hold or sell

Mike
Thank you.
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ccieemeritus
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Re: Cost basis of shares from converted RSUs

Post by ccieemeritus » Wed Dec 27, 2017 3:19 am

If you look carefully at your pay stubs and w-2’s in the year they vested, you should see the vesting reported as income and that 25% of the shares were sold to pay federal income tax (plus some for state income tax). Depending on your tax bracket 25% may or may not have been sufficient in that tax year (which may have resulted in you sending an extra check to the IRS on April 15th the year after vesting).

That’s why the price at time of vesting is your tax cost basis for capital gains: you already paid tax on that w-2 reported RSU income in the year they vested.

You are wise to doublecheck the cost basis the brokerage reports. The government has some $#&*@ rules which seem to require a reported cost basis of zero on RSU shares. At least this year I see an “adjusted cost basis” column with a positive number. Cost basis on RSU and ESPP shares are the first thing to put under the microscope when reviewing turbo tax. The most important part of that is recognizing that you already reported income on the vested amount at time of vesting on the w-2 from the employer (verify that of course).

sco
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Re: Cost basis of shares from converted RSUs

Post by sco » Wed Dec 27, 2017 7:32 pm

Can’t you just check the transaction history when they were put into your brokerage account? This should also show the commissions if any, paid... I track these in a separate spreadsheet.

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MichaelRpdx
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Re: Cost basis of shares from converted RSUs

Post by MichaelRpdx » Thu Dec 28, 2017 12:02 pm

I also complicated the matter by doing an in kind transfer from the brokerage my employer used for everyone, Fidelity, to Vanguard.

Today I see transfer included cost basis information so Vanguard has it on record.

As for the taxes, Fidelity sold off 50% of the shares for tax withholdings. meh.
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sco
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Re: Cost basis of shares from converted RSUs

Post by sco » Thu Dec 28, 2017 5:10 pm

MichaelRpdx wrote:
Thu Dec 28, 2017 12:02 pm
I also complicated the matter by doing an in kind transfer from the brokerage my employer used for everyone, Fidelity, to Vanguard.

Today I see transfer included cost basis information so Vanguard has it on record.

As for the taxes, Fidelity sold off 50% of the shares for tax withholdings. meh.
I can tell you what happens in my fidelity account.. My taxes are reflected on my W2 (still employed), I get a 1099 that does not include the cost basis.

fabdog
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Re: Cost basis of shares from converted RSUs

Post by fabdog » Thu Dec 28, 2017 5:40 pm

there are differences RSU vs options...

The IRS changed the rule a few years back so if you sold/exercised options in a same day sale... it comes to you on a 1099 with no basis, and the money also shows up on your W2 as taxable income. Turbo tax can chew thru it, it is a bit complicated in Deluxe, but handles it with a nice walk thru in premiere

RSU vesting should not drive a 1099... unless you subsequently sold the shares.

Looks like your cost basis traveled across accounts for you, so as long as it matches what you thought when the shares vested you should be ok. Not surprised they sold a bunch, you had federal at at least 25%, whatever your state witholding rate is, and then SS/Medicare as well, unless you had already hit the SS max for the year

Mike

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