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Following is my situation (changed the numbers for simplicity):

ABC Inc vested 120 RSUs in 2018, in which 20 RSUs were sold by my employer (price of the share $10, and $20 trade fee) for the tax purposes. Now I have 100 RSUs which I never sold.

I got a 1099-B form from E*Trade, and I see the cost basis is $0. When I enter this information in TurboTax, I see my refund go down. Why is it going down? I already paid the tax with those 20 RSUs.

Please tell me what will be the correct cost basis for the above situation.

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  • Just to clarify: you got a 1099-B for the 20 shares that were automatically sold at the time of vesting to cover taxes and vesting expenses? I've never seen that. – prl Apr 14 '19 at 19:17
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    Assuming that the fair market value of the shares at the time of vesting was reported as income on your W-2, then you're correct that the basis of the shares should be the fair market value at the time of vesting. You can adjust the basis on Form 8949 if the value reported by the broker is incorrect. – prl Apr 14 '19 at 19:19
  • @prl: yes I got 1099-B for from E*Trade for those 20 shares. and how do I know that those were reported in W-2 ? – user3470629 Apr 14 '19 at 19:26
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I've used E*Trade for RSUs for many years, and they have never reported a "cost basis". I've always had to look up the current market price at the time of vesting as my cost basis. You definitely should not use $0 since shares were sold to account for the "income" you received via these shares. If you use a $0 cost basis then you'll be double-taxed.

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The 1099-B provided by E*Trade is for the sell occurred on vest date i.e, sale proceeds from the sell of 20 shares in market. The net 100 shares you received after tax should not be on the 1099-B. The cost basis of those 20 Shares is the award price on which you received RSUs. In your case you received it as an award of 0 price.

The rest 100 shares will not be reported until you sell them. Also, the cost price of the 100 shares will be the fair market value on the vest (this is usual the close price of stock from one day before the vest date or sometimes the execution price of the sold 20 shares).

Please note, as these shares are result of RSUs awarded by ABC Inc, you can post the question to the Head of Compensation and Benefits team of ABC Inc. You can also request the team to confirm if the income from sell of 20 shares has been reported on W2 form.

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  • It's unlikely that the RSU shares vested at $0.00. It is far more likely that E*Trade did not report the basis correctly. This is quite common with RSUs, as they are not "covered securities". – Ross Patterson Jan 31 at 2:21
  • The 20 shares sold will be having 0 cost but the 100 shares retained will get the Fair Market Value on vest. This is because 20 shares were awarded by employer with 0 cost and 200 are post taxes. – Abs Feb 1 at 7:45
  • No, the cost basis of the 20 RSU shares that were sold, and that should be listed on the 1099-B, is the share price at the time of vesting. That's because the OP has already paid ordinary income tax on those 20 shares. The "award price" of those shares is the same as for the other 100 - $10 according to the OP. But it's quite common for brokers to list the basis of such shares as $0.00. Some (like Fidelity) provide the actual basis in an additional report, just not in the 1099-B. Use code "B" on form 8949 to correct this. – Ross Patterson Feb 8 at 3:27
  • If there was any cost basis for 20 RSU then the employer should have communicated during the vesting. Usually RSU granted like a free share where in employee does not invest any amount. Hence, the shares sold in market should be reported as 0 cost basis on 1099-B. If this guy did pay any money to receive those 120 RSUs, then the cost basis can be more than 0 per unit. – Abs Feb 8 at 15:42
  • That's not how RSUs work, at least not for stock that is publicly traded. An RSU share's value, for tax purposes, is its share price on the open market on the day of vesting, exactly. And the company has to withhold taxes on that value at the time of vesting, remit it to the IRS, and report it on the W2 as compensation. And because the recipient has already been taxed at that price, that price is the basis for taxation on future sales. That's true regardless of whether a share is immediately sold to pay taxes, or sold 50 years later. – Ross Patterson Feb 8 at 19:58

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