r2i forum

Hi,

In case of sale of ESPP Shares, there are two income which needs to be determined. One is the computation of Ordinary Income and the other is the computation of Capital Gains. Ordinary Income is the difference between the Grant Price and Fair Market Value on the Exercise Date, which is taxed at ordinary income tax rates. Capital Gains is the Sale Price less the Exercise Price. Long Term or Short term will depend on the period of holding after Exercise Date.

Since you do not hold GC nor USC you will be filing as a Non Resident. Also you need to take care of reporting the same on your India Income tax returns.

Hi, Based on pub 519 information, it sounds like the captital gains are taxable ONLY IF one has been in the US for at least 183 days of the tax year. My wife moved back to India in Dec 2014 and we sold her ESPP in 2015 in a fully qualified disposition. We do NOT have GC and we have not been physically present in US at all in 2015. Based on the following text pasted from pub 519 I believe that my wife's capital gains from sale of ESPP is not taxable. However, the Ordinary Income part is. Correct me if I'm wrong.

https://www.irs.gov/publications/p519/ch04.html

"Trading in stocks, securities, and commodities. If your only U.S. business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U.S. resident broker or other agent, you are not engaged in a trade or business in the United States.

If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year."