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Filing Your Tax Forms After
Selling Your Restricted Stock
Morgan Stanley has prepared the following information to assist you in
understanding the tax consequences involved when selling vested shares from
a restricted stock award. Included are sample forms and an explanation of the
information for reporting the sale of these shares on your individual income
tax return for 2014. Please retain all forms sent to you by Morgan Stanley to
use when preparing your tax return. Morgan Stanley and its affiliates do not
provide tax or legal advice. You should therefore seek tax advice based on your
particular circumstances from an independent tax advisor of your choosing.
Where do I get the information I need?
Q. WHAT INFORMATION
DO I NEED TO FILE MY
TAX RETURN?
A. The following pages describe
the information you will need
when you prepare your 2014
individual income tax return
(Form 1040). Assemble the following forms when you are ready to
prepare your tax return:
• Morgan Stanley’s Exercise
Confirmation Form or Year-End
Exercise Summary Statement.
• W-2, Wage and Tax Statement
from your employer.
• Morgan Stanley’s IRS Form 1099-B.
• IRS Form 8949: Sales and other
Dispositions of Capital Assets.
• IRS Form Schedule D: Capital
Gains and Losses.
Forms
How to Obtain
Questions?
Release Confirmation
OR
Year-End Transaction
History ­Statement
Morgan Stanley mails this
to your home at the time of
your original release and sale.
Morgan Stanley will also
post this to your stock plan
account online.
Call Morgan Stanley’s Tax
Reporting Service Center,
toll-free 877-772-1099
or 801-617-7467.
Form 1099-B
Morgan Stanley sends this
to you by February 15th* of the
year following that in which
the sale occurs. Morgan Stanley
will also post this to your stock
plan account online
Call Morgan Stanley’s Tax
Reporting Service Center,
toll-free 877-772-1099
or 801-617-7467.
Form W-2
Your company will send
this to you.
Call your company’s
payroll department.
IRS Form 8949
Visit your local IRS office or
call 800-TAXFORM. You may
also obtain this form via the
Internet at www.irs.gov.
Call your local IRS office
or consult your tax advisor.
Schedule D (Form 1040) Visit your local Internal Revenue
Service (IRS) tax office or call
800-TAX FORM. You may also
obtain this form via the Internet
at www.irs.gov.
Call your local IRS office
or consult your tax advisor.
FILING YOUR TAX FORMS
Exhibit 1: Release Confirm
(For Illustrative Purposes Only)
ABC COMPANY
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REVIEW THE EXAMPLE
The following example reflects a salary w $45,000, a vest of 200 shares
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of hypothetical ABC Company stock
and a sale of the stock. The exhibits
will show you where you can find the
information you need to prepare your
2009
individual tax return. This example
2014
assumes you have not elected to file
an 83(b) election.
a
e
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p
$50,250.00
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2014
Step 1
YOUR COMPENSATION INCOME FROM
THE VESTING OF YOUR RESTRICTED
STOCK AWARD
At the time your restricted stock award vests,
the full fair market value will be taxed as
compensation income. The fair market value
is the value of the stock on the day of vesting,
multiplied by the number of shares or units.
2
b
2014
MORGAN STANLEY | 2014
c
The example above is hypothetical and does not necessarily
reflect the results (including transaction costs and withholding)
of an actual vesting event. You may instead receive a companyprovided confirmation when shares vest, depending on your
company’s preferences.
Exhibit 2: Form W-2 Wage
And Tax Statement
(For Illustrative Purposes Only)
Exhibit 1 shows the release confirmation from
Morgan Stanley, which will show the amount
subject to taxation a and the applicable
­withholding at the time of vest b .
Your company will include the taxable amount
of gain as compensation income on your Form
W-2 in the year of the vesting event, shown
in Exhibit 2. This amount will be added to
any other income reported by your company
to the IRS, as seen in c on the following
page. In this example, the salary of $45,000
has been added to the $5,250 gain from the
vested c­ ompany stock. If you paid in order to
receive the initial award, the amount would
be subtracted from the gain in Exhibit 1 and
the wages in Form W-2. Any taxes withheld
at the time of vesting would be included as
part of your year-end ­withholding amounts.
FILING YOUR TAX FORMS
Exhibit 3: Irs Form 8949 Sales And Other Dispositions
Of Capital Assets (For Illustrative Purposes Only)
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Step 2
2014
CAPITAL GAINS AND/OR LOSSES
Calculate your capital gains and/or losses using
the appropriate IRS forms. All capital transactions
are reported on Form 8949 Sales and Other
Dispositions of Capital Assets (Exhibit 3); the
subtotals from this form are then carried over
to Schedule D (Exhibit 4), where gain or loss
is calculated in aggregate.
2014
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Exhibit 4: Irs Form 1040 Schedule D Capital Gains
And Losses (For Illustrative Purposes Only)
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2014
Complete appropriate Short-Term or Long-Term section.
Check appropriate Box A, B or C, depending on what is provided within either Box 3 or Box 5 on your 1099-B.
Sections b, c, d and e should be populated with the amounts from your 1099-B. Section g should include any
compensation income associated with the transaction.
The examples are hypothetical and does not reflect the
results of an actual sale or transaction.
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Part I corresponds with Part I of Form 8949. The totals from Form 8949 are to be carried over to Schedule D.
Questions & Answers
Q. WHAT IS A SECTION 83(B) ELECTION
AND HOW DOES IT WORK?
A Section 83(b) election is a special
tax filing with the IRS that allows you
to pay the ordinary income taxes due on
your restricted stock award when it is
granted, rather than when it vests. Despite the fact that taxes have been paid,
the shares are still subject to forfeiture
if the participant leaves the company. It
A.
3
MORGAN STANLEY | 2014
must be filed within 30 days of receipt of
the award, and if the shares are forfeited
there is no deduction allowed for taxes
that have been paid.
Q. WHEN MY STOCK AWARD VESTS,
come is equal to the fair market value of
the stock at the time of vest multiplied by
the number of shares vesting. The income
you earned upon the vest is reported as
part of the taxable compensation (wages)
on Form W-2 in Box 1.
WHAT IS THE AMOUNT OF MY
COMPENSATION/INCOME AND
Q. HOW CAN I DETERMINE MY CAPITAL
WHERE IS IT REPORTED?
GAIN OR LOSS ON SHARES SOLD?
A.
The amount of your compensation in-
A. Please refer to Step 2 of this brochure.
FILING YOUR TAX FORMS
Exhibit 5: Sample Morgan Stanley Form 1099-B
(For Illustrative Purposes Only)
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Q. WHAT IS THE COST (TAX) BASIS
OF SHARES I OBTAINED THROUGH
A VESTING EVENT?
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A. The term “cost basis” refers to the original
value of an asset for tax purposes (usually
the purchase price), adjusted for wash sales,
stock splits, reinvested dividends and return
of capital distributions. In the case of selling
vested shares from a restricted stock award,
it is the fair market value of your company’s
stock at the time of vesting, multiplied by
the number of units or awards.
The cost basis is used to determine capital gain or loss when an asset is sold or
disposed of. In accordance with reporting
requirements, Morgan Stanley will track
and report the adjusted cost basis of covered stock plan shares for the 2014 tax year.
As shown on Exhibit 5, you can find d
“Cost or other basis” on your 1099. Please note
that the basis reporting requirement does not
apply to noncovered securities. Although we
are not required to report the cost basis for
noncovered securities to the IRS, we will provide the cost basis on the Form 1099-B. Please
refer to your sales confirm for the information
when selling restricted stock shares.
d
The example above is hypothetical and does not reflect the results of an actual sale or transaction.
Q. CAN I FILE A FORM 1040EZ OR
FORM 1040A WITH A FORM 8949 AND
A SCHEDULE D FOR A YEAR IN WHICH
I SOLD STOCK?
A. No. You are not permitted to file a Form
1040EZ or Form 1040A for a year in which you
have sold any stock. Form 8949 and Schedule
D must be attached to Form 1040.
NOTE: The example shown in Exhibit
5 is based on one transaction. If you
conducted multiple transactions in
2014, you must list each separately on
Form 8949 and Schedule D.
THE MORGAN STANLEY ADVANTAGE
For nearly 80 years, Morgan Stanley has been a leader, innovator and resource for successful individuals and their
families, as well as corporations, foundations and endowments. Our Financial Advisors work from an extensive
knowledge base built on diverse skills, experience, training and professional interests. The Global Stock Plan
Services unit of Morgan Stanley has over four decades of experience delivering advice and transaction support to
stock plan administrators and participants. We are also a market leader in providing financial solutions to meet
the specialized needs of executives, including #1 in 10b5-1 plans.
*Source: Washington Service. Morgan Stanley ranked #1 in 10b5-1 market share from 2005 through 2013. Data from the period 2/1/2005 to 5/31/2009
reflects the formerly separate PDP businesses of the Global Wealth Management Group of Morgan Stanley & Co. LLC and the Smith Barney division of
Citigroup Global Markets Inc. that now form Morgan Stanley Smith Barney LLC. This data also includes transactions from Morgan Stanley & Co. LLC.
Information contained herein was obtained from sources believed reliable but the accuracy and completeness thereof cannot be guaranteed. Information
contained herein is subject to change.
Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax
or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for legal matters.
© 2014 Morgan Stanley Smith Barney LLC. Member SIPC.
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