FAQs - Family Law Software
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FAQs

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Question: How can I enter an Employee Stock Purchase Plan?

Answer: There are two kinds of employee stock purchase plans: qualified and non-qualified.

In qualified plans, the employee may purchase stock at a discount. When the employee sells the stock, some or all of the gain may be capital gain. Typically, some of the gain is also ordinary income.

In nonqualified plans, the same is true, but also the difference between the value of the stock when purchased and the purchase price is considered compensation income when the stock is purchased.

You can see more information about the tax treatment of employee stock purchase plans in IRS publication 525. Search on "employee stock purchase plans."

Entering the purchase

At the time of purchase, for a qualified plan, you may enter the purchase amount as a write-in Living Expense.

Then, create a Cash & Investment entry for the stock. Click "more info," and then View/Edit Value. Override each year's entry to indicate the value that you anticipate the stock would have each year, considering both the acquisition cost and appreciation.

If this is a nonqualified plan, there will also be some taxable income at the time of purchase. Enter that as an override on the View/Edit Taxes report to increase the wage amount by the amount taxable in the year of purchase.

Entering the sale

In general, Family Law Software assumes that stock is not sold unless necessary for liquidation.

If the stock needs to be liquidated, see the year in which the stock is liquidated, and enter a tax basis for the asset which gives the appropriate tax amount for liquidation in that year. Family Law Software will treat all gain as capital gain. To the extent some of the gain is ordinary income, you may want to reduce the tax basis you enter so that the tax amount comes out correctly.

You can see the tax amount on the liquidations on the backup report entitled Financial Investment Liquidation.