1. What is ESPP Adjusted Cost Basis?

The Adjusted Cost Basis (ACB) for Employee Stock Purchase Plans (ESPP) represents the actual cost basis of shares purchased through an ESPP program. It's used for tax purposes when calculating capital gains or losses upon sale of the shares.

2. How Does the Calculator Work?

The calculator uses the ESPP Adjusted Cost Basis formula:

Where:

• \( FMV \) — Fair Market Value at purchase (currency/share)
• \( Discount \) — ESPP discount percentage (%)
• \( Exercise Price \) — Price paid to exercise the option (currency/share)

Explanation: The formula calculates the true cost basis by accounting for both the discounted purchase price and any exercise costs associated with the ESPP shares.

3. Importance of ACB Calculation

Details: Accurate ACB calculation is crucial for determining capital gains tax liability when selling ESPP shares. It ensures proper tax reporting and helps optimize tax strategies for employee stock compensation.

4. Using the Calculator

Tips: Enter the fair market value at purchase, the ESPP discount percentage, and the exercise price. All values must be valid (positive numbers, discount between 0-100%).

5. Frequently Asked Questions (FAQ)

Q1: Why is ACB important for ESPP shares?
A: ACB determines your actual cost for tax purposes, which affects capital gains calculations when you sell the shares.

Q2: How does the discount affect ACB?
A: The discount reduces your effective purchase price, but for tax purposes, it's added back to determine your true cost basis.

Q3: When should I use this calculator?
A: Use it when preparing to sell ESPP shares or when filing taxes to determine your accurate cost basis.

Q4: Are there different tax treatments for ESPP?
A: Yes, ESPP shares may qualify for preferential tax treatment if holding periods are met, but ACB calculation remains fundamental.

Q5: What if I have multiple ESPP purchases?
A: Calculate ACB separately for each purchase lot, as FMV and discount may vary between offering periods.