Tax Information Regarding Your Stock Plan(s)
This document is not intended as legal or tax advice. You are strongly encouraged to speak with your tax or financial
professional regarding your specific circumstances. Any tax information provided in this document is not intended to be
used for the purpose of avoiding penalties that may be imposed on the taxpayer.
What is New in 2012
As the record keeper for your Company’s Stock Plan(s), AST Equity Plan Solutions (“AST”) will be sending you
one or more Form 1099-B’s (Proceeds From Broker and Barter Exchange Transactions) if you sold shares in
2011 – just as we have done in past years. However, as a result of new IRS reporting requirements, we
wanted to bring some Form 1099-B changes to your attention. This explanation is intended to provide a
brief overview of the new IRS Form 1099-B. Detailed information can be accessed at
http://www.irs.gov/pub/irs-pdf/i1099b.pdf
Cost Basis
In prior years, the only data required to be reported to the IRS and plan participants were the number of
shares sold and the sale proceeds. Under the new regulations, for shares acquired after January 1, 2011
(“Covered Shares”), the IRS now requires brokers to include the following additional fields on Form 1099-B:

Date share were acquired (purchase date) – Box 1b

The cost basis of the shares sold – Box 3

Indicator for a "Noncovered Security" i.e. shares acquired prior to January 1, 2011 – Box 6

Whether the transaction was short term or long term (shares held more than one year) – Box 8
Wash Sale
The Wash Sale Rule states that an individual cannot take a loss on a stock if s/he acquires the same (or a
substantially similar) stock within 30 days before or after the sale. While this wash sale principle is not new,
under the new Form 1099-B reporting requirements, a broker is required to report losses that are
disallowed where the loss was realized within the 30-day window of a corresponding purchase. This
disallowed wash sale loss is reflected in Box 5.
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Overview – ESPP Taxation
For US tax purposes, ESPPs fall into one of two primary categories:
 Qualified Plans (§423 Plans). A qualified 423 plan allows employees to purchase stock at a discount
from the fair market value (“FMV”) as defined by your Company’s Plan with no taxable event
occurring until the shares are sold or otherwise disposed of. If shares are held for a period which is
the longer of 2 years from the date of grant (the start of the purchase period) and 1 year from the
date of purchase, the shares are eligible for preferential tax treatment (“Qualifying Disposition”).
Shares not held for the above holding period result in a “Disqualifying Disposition.”
 Non-Qualified Plans. These plans don’t provide the above preferential tax treatment. Any discount
is taxed as compensation on the date of purchase.
In general, ESPPs allow scheduled, ongoing purchases of Company stock through post-tax payroll
contributions. For specifics rules and features of your Plan, you should refer to the Plan document.
Tax treatment will be based upon several factors, including type of Plan (Qualified versus Non-Qualified),
any discount at the time of purchase and the length of time you have held the shares.
Related Documents
There are several documents you will need to gather the information needed:
Document/Form
Delivery
Form W-2
Form 1099-B
Provided to you by your Company
Mailed to your home address by AST. You may also access a copy at
our web site: www.astepsdiv.com.
Statements are mailed to your home address by AST. You may also
access the information at our web site www.astepsdiv.com.
Available from your Company.
Mailed to your home address by AST for plan shares purchased
under a Section 423 tax qualified plan. You may also access a copy
at our web site www.astepsdiv.com.
Available through the IRS offices or at their web site: www.irs.gov.
Available through the IRS offices or at their web site: www.irs.gov.
ESPP Participant Statement
Plan Document
Form 3922
Form 8949
Schedule D
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Tax Calculation
First Step – Compensation
If your plan does not offer a discount, there is no associated compensation income recognized. If your plan
does offer a discount, the compensation income is calculated as follows:
Type of Plan
Type of Disposition
Income Calculation
Non-Qualified Plan
Any
Shares Purchased x (FMV on Purchase – Purchase Price)(1)
Qualified Plans
Qualified
Disposition
Lesser of (2):
 Shares sold x (Discount % x FMV on Grant Date) or;
 Shares sold x (Sale price – Purchase Price)
Qualified Plans
Disqualified
Disposition
Shares sold x (FMV on Purchase Date – Purchase Price) (2)
(1) Compensation recognized at the time of purchase.
(2) Compensation recognized at the time of sale.
Hypothetical Example
Assumption
Value
Form Referenced
FMV on Grant Date (January 1, 201X)
FMV on Purchase Date (March 31, 201X)
Discount
Purchase Price
Shares Purchased
Shares Sold (July 15, 201X)
Sale Price
$10.00
$12.00
15%
$10.20
25
25
$15.00
Form 3922(a)
Form 3922(a)
Plan Document
Form 3922(a)
Form 3922(a)
Form 1099-B
Form 1099-B
(a) Also available on Participant Statement and AST web site.
Type of Plan
Type of Disposition
Income Calculation
Non-Qualified Plan
Any
25 x ($12.00 – $10.20) = $45.00
Qualified Plans
Qualified Disposition
Lesser of:
 25 x (15% x $10.00) = $37.50 or;
 25 x ($15.00 – $10.20) = $120.00
Qualified Plans
Disqualified Disposition
25 x ($12.00 – $10.20) = $45.00
Your employer should report compensation income from a disqualifying or qualifying disposition on your
Form W-2. If all compensation is included on your Form W-2, you report the income from your W-2 on your
tax return as you normally would. If ESPP disqualifying or qualifying income is not included on your W-2, you
will need to add the compensation from the ESPP to the compensation reported on your Form W-2 on your
tax return.
Page | 3
Second Step – Gain or (Loss) from Sale of Shares
Once you have determined the compensation associated with the shares sold, you can establish the cost
basis of your shares by adding the compensation amount to the purchase price. Using the same example
above, the Cost Basis for the 25 shares sold would be as follows:
Type of Plan
Type of Disposition
Income
Cost Basis
Non-Qualified Plan
Any
$45.00
$45 + (25 x $10.20) = $300.00
Qualified Plans
Qualified Plans
Qualified Disposition
Disqualified Disposition
$37.50
$45.00
$37.50 + (25 x $10.20) = $292.50
$45 + (25 x $10.20) = $300.00
Once you have your Cost Basis Established,
you are ready to complete new Form 8949 Sales and Other Dispositions of Capital
Assets, using the information provided on
your 1099-B and your Cost Basis. Please
refer to “What’s New in 2011” section for
update on Form 1099-B.
 Box 1(a): Description and Number of
shares sold
 Box 1(c): Purchase Date
 Box 1(d): Sale Date
 Box 1(e): Proceeds
 Box 1(f): Cost Basis
 Box 1(g): Gain/Loss
For illustration purposes, the hypothetical
form would look similar to the example to
the right.
The information from Form 8949 then
gets carried forward to Schedule D –
Capital Gains and Losses. In this
instance, the gain is being reported as
Short-Term Capital Gain.
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Overview – Stock Option Taxation
Stock Option gives you the right to buy a specific number of shares of your company's stock at a specified
price for a stated period of time. For US tax purposes, Stock Options fall into one of two primary categories:
 Incentive Stock Options (“ISO” - Qualified under §422 of IRC). An ISO provides the benefit that
there is no taxation at the time of exercise. Taxation is deferred until the shares are sold or
transferred (“Disposition”). If shares are held for a period which is the longer of 2 years from the
date of grant and 1 year from the date of purchase (exercise), the shares are eligible at time of sale
for preferential tax treatment (“Qualifying Disposition”). Shares not held for the above holding
period result at time of sale in a “Disqualifying Disposition”.
 Non-Qualified Stock Options (“NQ”). These work in the same manner of ISO with the exception that
the holder will recognize compensation income and pays income and FICA taxes as applicable at the
time of exercise.
For specifics features of your grant and tax treatment of your option, you should refer to the Plan document
and your grant agreement. As noted above, tax treatment will be based upon several factors, including type
of grant (ISO versus NQ), any discount at the time of purchase and the length of time you have held the
shares.
Related Documents
There are several documents you will need to gather the information needed:
Document/Form
Delivery
Form W-2
Form 1099-B
Provided to you by your Company
Mailed to your home address by AST You may also access a copy at
our web site: www.astepsdiv.com.
Statements are mailed to your home address by AST. You may also
access the information at our web site: www.astepsdiv.com.
Available from your Company.
Exercise Confirmation
Plan Document/Grant
Agreement
Form 3921
Form 8949
Schedule D
Mailed to your home address by AST for options exercised under an
ISO. You may also access a copy at our web site: www.astepsdiv.com.
Available through the IRS offices or at their web site: www.irs.gov.
Available through the IRS offices or at their web site: www.irs.gov.
Page | 5
Tax Calculation
First Step – Compensation
The compensation income as a result of an exercise is calculated as follows:
Type of Grant
Type of Disposition
Income Calculation
NQ
Any
Options Exercised x (FMV on Exercise – Exercise Price)(1)
ISO
Qualified Disposition
No ordinary income
ISO
Disqualified Disposition
Options Exercised x (FMV on Exercise – Exercise Price)( (2)
(1) Compensation recognized at the time of exercise.
(2) Compensation recognized at the time of sale.
Hypothetical Example
Assumption
Value
Form Referenced
Grant Price
Shares Exercised
FMV on Exercise Date
Shares sold
Sale Price
$10.00
25
12.00
25
$15.00
Exercise Confirmation and Form 3921(a)
Form 3921(a)
Form 3921(a)
Form 1099-B
Form 1099-B
(a) Applicable only for ISO. Also available on AST web site.
Type of Plan
Type of Disposition
Income Calculation
NQ
Any
25 x ($12.00 – $10.00) = $50.00
ISO
Qualified Disposition
$0
ISO
Disqualified Disposition
25 x ($12.00 – $10.00) = $50.00
Your employer should report compensation income from a disqualifying disposition of an ISO or exercise of
a NQ on your Form W-2. Since all compensation is included on your Form W-2, you report the income from
your W-2 on your tax return (generally a Form 1040) as you normally would.
It should also be noted that in some instances, under agreement with your employer, AST does not provide
a 1099-B if your exercise was a Same-Day-Sale (exercise and sell all shares immediately) and all income is
reported to the employee on his/her W-2. If you performed a Same-Day-Sale, had the gain from the exercise
reported on your W-2 and did not receive a 1099-B, you are not required to complete the below outlined
steps for those specific transactions.
Page | 6
Second Step – Gain or (Loss) from Sale of Shares
Once you have determined the compensation associated with the shares sold, you can establish the cost
basis of your shares by adding the compensation amount to the purchase price. Using the same example
above, the Cost Basis for the 25 shares sold would be as follows:
Type of Plan
Type of Disposition
Income
Cost Basis
NQ
Any
$50.00
$50.00 + (25 x $10.00) = $300.00
ISO
ISO
Qualified Disposition
Disqualified Disposition
$0.00
$50.00
$0.00 + (25 x $10.00) = $250.00
$50.00 + (25 x $10.00) = $300.00
Once you have your Cost Basis Established,
you are ready to complete new Form 8949 Sales and Other Dispositions of Capital
Assets, using the information provided on
your 1099-B and your Cost Basis. Please
refer to “What’s New in 2011” section for
update on Form 1099-B.
 Box 1(a): Description and Number of
shares sold
 Box 1(c): Purchase Date
 Box 1(d): Sale Date
 Box 1(e): Proceeds
 Box 1(f): Cost Basis
 Box 1(g): Gain/Loss
For illustration purposes, the hypothetical
form would look similar to the example to
the right.
The information from Form 8949 then
gets carried forward to Schedule D –
Capital Gains and Losses. In this
instance, the gain is being reported as
Short-Term Capital Gain.
Page | 7
Overview – Restricted Stock Awards and Units
A Restricted Stock Award (“RSA”) is an award of company stock where the employee’s rights to the stock
are restricted until the share’s vesting date(s). Once the shares have vested (restriction has lapsed), the
employee owns the shares outright. Similarly, a Restricted Stock Unit (“RSU”) is similar except the shares are
not issued at the time of grant and each unit is equivalent to a share. In general, in the US, income is
recognized and taxes are due upon the vesting of the RSA or RSU award (restrictions on the award lapse).
For specifics features of your award, you should refer to the Plan document and your award agreement.
Related Documents
There are several documents you will need to gather the information needed:
Document/Form
Delivery
Form W-2
Form 1099-B
Provided to you by your Company
Mailed to your home address by AST. You may also access a copy at
our web site: www.astepsdiv.com.
Statements are mailed to your home address by AST. You may also
access the information at our web site: www.astepsdiv.com.
Available from your Company.
Release (Lapse) Confirmation
Plan Document/Award
Agreement
Form 8949
Schedule D
Available through the IRS offices or at their web site: www.irs.gov.
Available through the IRS offices or at their web site: www.irs.gov.
Page | 8
Tax Calculation
First Step – Compensation
The compensation income as a result of a vesting event is calculated as follows:
Type of Grant
Type of Disposition
Income Calculation
RSA
Any
Shares Vested x (FMV on Vest Date – Award Price)(1)(2)(3)
RSU
Any
Shares Vested x (FMV on Vest Date)(1)(2)
(1) Compensation recognized at the time of vest.
(2) Generally Awarded at $0.
(3) Excludes awards where employee has filed an 83(b) election.
Hypothetical Example
Assumption
Value
Form Referenced
FMV on Vest Date
Shares Vested
Sale Price
$12.00
25
$15.00
Release Confirmation(a)
Release Confirmation(a)
Form 1099-B
(a) Also available on AST web site
Type of Plan
Type of Disposition
Income Calculation
RSA
Any
25 x ($12.00 – $0.00) = $300.00
RSU
Any
25 x ($12.00 – $0.00) = $300.00
Your employer should report compensation income from the vesting on your Form W-2. Since all
compensation is included on your Form W-2, you report the income from your W-2 on your tax return as
you normally would.
Page | 9
Second Step – Gain or (Loss) from Sale of Shares
Once you have determined the compensation associated with the shares sold, you can establish the cost
basis of your shares by adding the compensation amount to the purchase price. Using the same example
above, the Cost Basis for the 25 shares sold would be as follows:
Type of Plan
Type of Disposition
Income
Cost Basis
RSA
Any
$300.00
$300.00 + (0) = $300.00
RSU
Any
$300.00
$300.00 + (0) = $300.00
Once you have your Cost Basis Established,
you are ready to complete new Form 8949 Sales and Other Dispositions of Capital
Assets, using the information provided on
your 1099-B and your Cost Basis. Please
refer to “What’s New in 2011” section for
update on Form 1099-B.
 Box 1(a): Description and Number of
shares sold
 Box 1(c): Purchase Date
 Box 1(d): Sale Date
 Box 1(e): Proceeds
 Box 1(f): Cost Basis
 Box 1(g): Gain/Loss
For illustration purposes, the hypothetical
form would look similar to the example to
the right.
The information from Form 8949 then
gets carried forward to Schedule D –
Capital Gains and Losses. In this
instance, the gain is being reported as
Short-Term Capital Gain.
Page | 10