Employee Stock Purchase Plan (ESPP) Stock Donation Reported on W-2?

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Topic Author
millionsofpennies
Posts: 11
Joined: Mon May 09, 2016 7:23 pm

Employee Stock Purchase Plan (ESPP) Stock Donation Reported on W-2?

Post by millionsofpennies »

Hi everyone,

Earlier this year I donated some of my ESPP stock (held in E*Trade) to a charitable organization. The stock was held longer than 1 year and has appreciated. The organization is on the list of charities within the E*Trade Charitable Donation site. At the time, the charitable organization sent me a confirmation letter noting how many shares I donated and on which date. This is my first experience with donating stock, but I understand that the value should be tax deductible (https://www.bogleheads.org/wiki/Donatin ... securities).

Recently, my employer sent me a letter stating:

"You are receiving this form because you have transferred Employee Stock Purchase Plan (ESPP) shares out of your E*Trade Stock Plan Account this year. Under a tax-qualified (Section 423) ESPP, taxable income is generated in the year of sale or gift equal to the lesser of either the actual gain upon sale or the purchase price discount at the beginning of the offering. [Employer Name] is required to report this income to the Internal Revenue Services on a Form W-2 for current and former employees. No tax will be witheld on the income reported.

Table: Purchase Period Begin Date, Purchase Date, Purchase Price, Shares Sold, Sale Date, Sale Price

...It is the individual's responsibility to pay the tax liability related to ESPP sales when filing an annual individual income tax return."


QUESTION: I just want to confirm if it is normal procedure to report donated stock on the W-2? Or is there any reason I need to provide the confirmation letter of donated stock to my employer instead of filling out their form? Thanks in advance.
Topic Author
millionsofpennies
Posts: 11
Joined: Mon May 09, 2016 7:23 pm

Re: Employee Stock Purchase Plan (ESPP) Stock Donation Reported on W-2?

Post by millionsofpennies »

Bump. Any comments would be appreciated. Thank you.
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gobel
Posts: 399
Joined: Mon Feb 08, 2021 4:50 pm

Re: Employee Stock Purchase Plan (ESPP) Stock Donation Reported on W-2?

Post by gobel »

I think you trigger wage income anytime you dispose of ESPP shares, including selling them, donating them, or transferring to another person. The amount depends on if it was a qualified or disqualified disposition. If you held for 1 year and also the grant was 2 years ago, then it's qualified and the amount on your paystub should be (grant price * discount * number of shares). If it wasn't a qualified disposition, then the amount would be ((FMV - purchase price) * number of shares).

(grant price is the price on the first day of the ESPP period and FMV is the price on the last day of the ESPP period.)

If you held the shares for more than a year, then you get to deduct the full value of the shares on the day you donated them. If you didn't hold for a year, you can only deduct your cost basis, which is (amount you paid + amount of wage income).
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