How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Robin D. Your Own Question
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13316
Experience:  15years with H & R Block. Divisional leader, Instructor
14155347
Type Your Tax Question Here...
Robin D. is online now
A new question is answered every 9 seconds

What are the long-term vs. short-term considerations when

Customer Question

What are the long-term vs. short-term considerations when selling stock from an employee stock purchase plan (ESPP)?
Submitted: 7 months ago.
Category: Tax
Expert:  Robin D. replied 7 months ago.
HelloThe tax consequences to you depend on whether or not you meet the special holding-period requirements for Section 423 ESPPs under the Internal Revenue Code: two years from the start of the offering and one year from purchase. The tax consequences for you also depend on stock-price changes between the purchase and your eventual sale.Not meeting the holding-period requirement of two years from offering/grant and one year from purchase is called a disqualifying disposition (DD). This occurs when you sell, transfer, or gift the stock too soon to get all of the favorable tax treatment that is available with tax-qualified ESPPs.You not only have to hold the stock long enough to get long-term capital gains rates for one year but also hold the stock within two years of the grant.If you sell or dispose of the stock without meeting the ESPP holding periods, you will recognize ordinary income at the time of sale. This income will appear on your Form W-2.

Related Tax Questions