If I took a loss on my sale of stock from an ESPP (employee stock purchase plan), and the stock had a qualifying disposition, what is my compensation income?

I found the following definition:

In a qualifying disposition, your compensation income is equal to the difference between what you paid for the shares and what you sold them for or the discount (difference between what you would have paid for the shares and what they were worth) on the grant date, whichever is lower.

Given that what I paid for the shares and what I sold them for is a loss (a negative number, which will always be less than the amount of the discount), is my compensation income zero or negative? Am I interpreting this wrong?

This is the United States.

  • 1
    Since you are asking about taxes, you must specify a country. Please edit your question and add the corresponding country tag. Apr 3, 2015 at 19:28
  • This is for America. I edited the question. Thanks for the tip.
    – tarun713
    Apr 3, 2015 at 20:10

1 Answer 1


The sentence you quoted does not apply in the case where you sell the stock at a loss. In that case, you recognize zero ordinary income, and a capital loss (opposite of a gain) for the loss.

Reference: http://efs.fidelity.com/support/sps/article/article2.html

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