Stock options on W-2 and 1099B

[kindracpa]

Hello, I have a client who exercised non-qualified stock options and then sold the stock in 2025.  He is retired so the only item on the W-2.  The 1099 received from MS Work also shows the same transaction and the same amount of gain.  How do I avoid this getting double-counted on his return and avoid a letter from the IRS for not reporting one of the transactions.  This is in Pro Series Basic.  Thank you!

[dascpa]

The investment house should send a supplemental gain-loss report reflecting the adjusted cost basis. Without it, you're lost.

[Just-Lisa-Now-]

agreed, dig through that brokerage statement to the back for the supplemental basis info, theyre pretty good about including that these days.

[kindracpa]

MS did provide the cost basis, but the capital gain = the amount of the W-2 he received from his employer.  The employer withheld tax (included on the W-2) on the exercise of the options.  

[Just-Lisa-Now-]

right, he gets taxed on the W2 income, that's how he gets a "basis" in the stock,(the same as if he'd got the payroll check then paid for the stock out of pocket), then he'll have a gain or loss from the sale.

If youre seeing a large gain, be sure youre using the adjusted basis included in the supplemental pages of the brokerage statement.

[Skylane]

When the company doesn't send correct or adequate paperwork (often happens)....  I use the sale date on the 1099B as the purchase date and use either the closing price/sh from the day before or opening price as the basis. it will generate a (very small) gain or loss on sch D.