Stock option plan - onesource.ubs.com · This guide will help you complete your annual U.S. tax...

Table of contents

Getting started 2• Is your plan an incentive plan or anon-qualifiedplan?•ForISOs:Haveyoumetthewithholdingperiod?

Gather your tax forms 4

Example 1:Non-qualifiedstockoptionplan (NQO), sell-to-cover exercise 5

Example 2:Non-qualifiedstockoptionplan (NQO)inacashlessexercise/same-daysale of all shares 9

Example 3:Incentivestockoptionplanwith aqualifyingdisposition 13

Example 4:Incentivestockoptionplan withadisqualifyingdisposition 17

ThisguidewillhelpyoucompleteyourannualU.S.taxformsifyouparticipatedinastockoptionplanduring2016.Wewillgothroughthreesteps:

1. Determineifyourplanisanincentivestockoptionplanornon-qualifiedstockoptionplan

2. Determineifyoumetyourincentivestockoptionplanholdingrequirements

3. Guideyouthroughtheappropriateexamplefor your transaction(s)

We urge you to consult with a personal tax advisor.UBSisnotlicensedtoofferlegal,accounting ortaxadviceanddoesnotoffersuchadvice.Taximplicationsvarywidelydependingonyour specifictransactions.(Pleaseseethetax disclosureonthelastpage.)

Equity Plan Advisory Services

Stockoptionplan2016 tax filing guide

Lastupdated:December2016

Gettingstarted

UBStaxinformationcanbedownloadedtoTurboTax,H&RBlock,TaxFormDrop-off(Lacerte),TaxACTandCCH.YoucanusethisserviceifyouhavereportableincomeonanIRSForm1099-B.

Whenyoureceiveyourtaxdocumentsinthemailorthroughe-Delivery,useyourUBSaccountnumberanduniqueDocumentIDprintedoneachtaxformasyourcredentialstodownload.AllUBSFinancialServicesInc.taxdocumentsareavailablefordownloadwithouthavingtorequestaccess.Foremployer/employeetaxforms,pleasecontactyourcompany’sHumanResourcesDepartment.

BelowisanexampleofaUBStaxdocumentwiththecredentialsidentifiedinsideredboxes:

BelowisanexampleoftheUBSTurboTaxscreenwherethosecredentialsmaybeentered:

2

3Need help? Werecommendyouconsultapersonaltaxadvisor.UBSisnotlicensedtoofferlegal,accountingortaxadviceanddoesnotoffersuchadvice.

meet certainrequirements,whicharediscussedinthistaxfilingguide.Underthisspecialtaxtreatment,thefulldifferencebetweentheexercisepriceandthesubsequentsalepriceofyourISOstockwillbetreatedasalong-termcapitalgain.

For ISOs: Have you met the holding period?UnderanISO,youdon’thaveanytaximplicationsuntilyousellyourshares(unlessyouaresubjecttoalternativeminimumtax,orAMT,whichisnotdiscussedinthisdocument).Preciselywhatthoseimplicationsaredependsonwhetheryou’vemettheholdingperiod.Whenyoudo,youhavea“qualifyingdisposition.”Thatmeansallofyourgainwillbetaxedatthemorefavorablelong-termcapitalgainsrate.Ifyoudonotmeetyourholdingperiod,youhavea“disqualifyingdisposition.”Inthiscase,partofyourgainistaxedasordinaryincome.

Determining if you have met the holding period•Determinethedatetwoyearsafteryourgrantdate, notedinyourplandocuments.•Determinethedateoneyearafteryourexercisedate, notedonyourUBSAdviceofExercise.

Ifyousoldyoursharesafterthesetwodates,youhaveaqualifyingdisposition,meaningyouhavemetyourholdingperiod.GotoExample 3onpage13tolearnhowtoreportyourtransactionsonyourtaxforms.

When you don’t meet the holding periodIfyousellyourshareswithouthavingmetthesecriteria,youhavea“disqualifyingdisposition.”Inthiscase,youwilltreataportionofyourgainasordinaryincome.IfyouselltheISOstockforlessthanyourexercisepriceyoudonothaveanyordinaryincomeandinsteadjustacapitalloss.GotoExample 4onpage17tolearnhowtoreportyourtransactionsonyourtaxforms.

Do you have a non-qualified stock option plan (NQO)? Gathertheformsshownonpage4,thenturnto Example 1 or 2.

Have you met the holding period for ISOs? Gathertheformsshownonpage4,thenturnto Example 3onpage13.

Didn’t meet the holding period for ISOs?Gathertheformsshownonpage4,thenturnto Example 4onpage17.

Astockoptionisabenefitthatallowsyoutobuysharesofcompanystockasprescribedbytheplanoveraspecifiedterm.Thiswillusuallyresultinyoubeingabletobuythesharesforalowerpricethanthefair marketvalueofthesharesatthetimeofexercise.If you exercisedoptionsand/orsoldstockfromanexercisein2016,youmayhavetaximplications.Yourtransactionscanbetreatedas:

• Ordinary income—Yourmonetarybenefitistaxedmuchlikepay.Usually,atleastaportionofyour taxableamountisconsideredordinaryincome.

• Capital gain or loss—Yourmonetarybenefitmaybe taxedatamorefavorableratedependingonwhetheryourecognizealong-termorshort-termgain.

Beforeyoucandeterminehowtotreatyourtransactions,youneedtoknowwhatkindofstockoptiongrantyou have.

Is your plan an incentive plan or a non-qualified plan?Therearetwotypesofstockoptionplans:• Incentivestockoptionplans(ISO)• Non-qualifiedstockoptionplans(NQO)

Yourcompanymostlikelywillletyouknowwhichtype of planyouhave.Ifyouareuncertain,contactyour HRrepresentative.

Do you have an incentive stock option plan?Ifyes,determineifyoumettheholdingperiodforspecialtaxtreatment.Gotothenextcolumn.

Do you have a non-qualified stock option plan?It’snotsubjecttoholdingperiodsoranyspecialtaxtreatment.Gathertheformsshownonpage4,thenturn to Example 1 or 2andbeginfillingoutyourtax forms.

Stockoptionsallowyoutobuysharesofthecompanyafteravestingperiodhaselapsed.Withnon-qualifiedstockoptions,thedifferencebetweentheexercisepriceandthefairmarketvalueatexerciseistaxableasordinaryincomeandwithholdingapplies.Nofavorabletaxtreatmentisavailablefornon-qualifiedstockoptions.IfISOsweregrantedtoyou,nowithholdingappliesandyoumayqualifyforfavorabletaxtreatmentifyou

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For illustrative purposes only. This is meant to be an example only. You should not rely on it for your tax reporting. Not all portions of this example may be applicable to your transaction(s). Need help? We recommend you consult a personal tax advisor. UBS is not licensed to offer legal, accounting or tax advice and does not offer such advice.

Havethefollowingdocumentshandy:

A W-2WageandTaxStatement

B IRSForm8949:salesandotherdispositions of capital assets*

C IRSScheduleD(Form1040):capitalgains andlosses

D UBSTradeConfirmation

E UBSForm1099-B

F UBSAdvice(s)ofExercise

Please note:Someoftheinformationisavailableon Form3921,ExerciseofanIncentiveStockOptionUnderSection422(b).

Gatheryourtaxforms

Need a copy of your Trade Confirmation or 1099-B? Tovieworprintcopies,logintotheUBS OneSourcewebsiteandclickonthe“StatementsandReports”tab.Thenselect“Transaction,ConfirmationsandNotices”andselect themonthof yourtransaction.Foracopyof your1099-B,select“TaxReports”andthenhighlight1099.

Have questions about your W-2 Wage and Tax Statement and Form 3921 for ISOs? Contactyourcompany’spayrollcenter.

* Form 8949 isgenerallynotrequiredifthecost/otherbasisisreportedonForm1099-Bandtherearenoadjustments.Pleasenote,however, thatunderIRSregulationsforgrantsissuedonorafterJanuary1,2014,whenanemployeeexercisesaNQO,thebrokeragefirmcannolongeradjustthecostbasisonForm1099-BforincomealreadyreportedonFormW-2.Thebrokerisrequiredtoreportthebasisasnotavailableorleavethebasisastheoriginalexercisepriceof theoption.Asaresult,taxpreparersarerequiredtomanuallyadjust thecostbasiswhenpreparingScheduleDandForm8949.Therefore,aForm8949isgenerallyrequiredwhenanemployeeexercisesaNQO inordertoaccuratelycapturethecostbasis.Schedule Disalwaysrequired.

A

B

C

D

AB

C

D

E

F

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Withnon-qualifiedplans,youhavepotentialtaximplications at two points in time: 1) attimeofexercise2) when you sell your shares

Inthisexample,wewillgothroughthefourstepstoreportyourtaxableordinaryincomeandcapitalgainsor losseswhenyousellsharesatexercisetocovertheoptionexercisecostandtaxes.

• Step 1:Determineyourtaxableordinaryincome• Step 2:Determinecapitalgainsandlosses• Step 3:CompleteForm8949• Step 4:CompleteScheduleD(Form1040)

Forthisexample,youwillneed:•UBSAdvice(s)ofExercise•UBSTradeConfirmation•Form1099-B•IRSForm8949•ScheduleD(Form1040)

Exercised and sold your shares in 2016?CompleteSteps1–4.

Only exercised shares in 2016?Withnon-qualifiedplans,youaretaxedattimeof exercise.CompleteStep1only.

Only sold shares in 2016?Youalreadypaidtaxesonyourexercise.Youneedthe amountoftaxableordinaryincomeatexercisefrom Step1inaprioryear.ThengotoStep2.

Example1:Non-qualifiedstockoptionplan(NQO), sell-to-cover exercise

Assumptions for Example 1:•Basesalary:$120,000•Exercisedate:12/15/16•Sharesexercised:2,025•Marketvaluepershareon exercisedate:$71.50

•Grantprice:$26.56•Saledate:12/15/16•Salepricepershare:$71.50

Step 1Determine your taxable ordinary income

Taxableordinaryincomeistheportionofyourtransactionthatistaxedasincomeratherthanacapitalgainorloss.ConsultyourUBSAdvice(s)ofExerciseforthisinformation.

Taxable ordinary income:

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With non-qualified plans, you have potential tax implications at two points in time: 1) at time of exercise2) when you sell your shares

In this example, we will go through the four steps to report your taxable ordinary income and capital gains or losses when you sell shares at exercise to cover the option exercise cost and taxes.

• Step 1: Determine your taxable ordinary income• Step 2: Determine capital gains and losses• Step 3: Complete Form 8949• Step 4: Complete Schedule D (Form 1040)

For this example you need:• UBS Advice(s) of Exercise• UBS Trade Confirmation• Form 1099-B• IRS Form 8949• Schedule D (Form 1040)

Exercised and sold your shares in 2016? Complete Steps 1 – 4.

Only exercised shares in 2016?With non-qualified plans, you are taxed at time of exercise. Complete Step 1 only.

Only sold shares in 2016?You already paid taxes on your exercise. You need the amount of taxable ordinary income at exercise from Step 1 in a prior year. Then go to Step 2.

Example 1: Non-qualified stock option plan (NQO), sell-to-cover exercise

Assumptions for Example 1:• Base salary: $120,000• Exercise date: 12/15/16• Shares exercised: 2,025• Market value per share on

exercise date: $71.50• Grant price: $26.56• Sale date: 12/15/16• Sale price per share: $71.50


Taxable ordinary income is the portion of your transaction that is taxed as income rather than a capital gain or loss. Consult your UBS Advice(s) of Exercise for this information.


a$91,003.50

December 20, 2016 Page 1 of 1 Advice of ExerciseUBS Financial Services Inc.UBS Equity Plan Advisory Services 315 Deaderick StreetNashville, TN 37238

This is to confirm that on December 20, 2016, we settled your exercise of 2025 options of XYZ Corporation Stock.Details of the options exercised follow:The amount ($83.99)will be deposited to your UBS Financial Services Inc. account as instructed.

Grant InformationGrant NumberGrant DateGrant TypeExercise Date Options Exercised Shares Sold Shares Not Sold Grant PriceOption Exercise Cost Fair Market Value Sale PriceTotal Sales Proceeds Total Gain

WithholdingFederal TaxFederal Supplemental Comp. Tax State TaxFICA TaxMedicare TaxLocal TaxOther TaxTotal Tax WithholdingBrokerage CommissionsShipping and Handling Transaction FeeNet ProceedsPayment FeePayment Adjustment

Net Payment

00001234508/07/2010

NQO12/15/2016

2,0251,170

855

$ 26.56$ 53,784.00$ 71.50$ 71.50$ 83,655.00$ 91,003.50

$( 22,750.88)$( 0.00)$( 4,001.60)$( 0.00)$( 1,319.55)$( 1,714.98)$( 0.00)$( 29,787.01)$( 75.00)$( 5.25)$( .30)$ 83.99

Total

2,0251,170

855

$ 53,784.00

$ 83,655.00$ 91,003.50

$( 22,750.88)$( 0.00)$( 4,001.60)$( 0.00)$( 1,319.55)$( 1,714.98)$( 0.00)$( 29,787.01)$( 75.00)$( 5.25)$( .30)

$ 83.99$( 0.00)$ 0.00

$ 83.99

a

a$91,003.50

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Next,locatethefollowinginformationonyourForm1099-B(shownatright).

•Dateacquired•Datesold•Costorotherbasisamounts 5 * reportedtoIRS.Adjustmentswillbe neededonForm8949inStep 3,asbasisonForm1099-Bcannolongerincludethetaxableincomeat exercise.(Seefootnoteonpage4formoredetails.)

Enter each of these numbers on IRS Form 8949, as shown on page 7.

Step 2Determine capital gains and losses

Whenyousellshares,yourealizeacapitalgainorloss.Youwillneedtoreportthatamountonyourtaxes.

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Next, locate the following information on your Form 1099-B (shown at right).

• Date acquired• Date sold• Cost or other basis amounts 5 *

reported to IRS. Adjustments willbe needed on Form 8949 in Step 3,as basis on Form 1099-B can nolonger include the taxable income atexercise. (See footnote on page 4 formore details.)



When you sell shares, you realize a capital gain or loss. You need to report that amount on your taxes.

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2

First, locate the “Amount credited” 2 on your UBS Trade Confirmation (shown at left).

(“Amount credited” is also referred to as “Proceeds” on IRS Form 8949 and Form 1040, Schedule D.)

Enter this number on IRS Form 8949, as shown on page 7.

34 5

* Basis of shares sold for Form 1099-B reporting purposes is the grant price for the 1,170 shares used to cover the exercise cost and taxes at exercise,and commission/fees for sale.

ab Confirmation

John Smith123 MAIN STREET ANYTOWN NJ 12345

Your Financial Advisor

Send checks/correspondence to: UBS FINANCIAL SERVICES INC. 1000 Harbor Blvd. Weehwaken, NJ 07086

UBS Financial Services Inc. 1000 Harbor Blvd., 7th Floor C-925Weehawken NJ 07086ubs.com/fs

December 20, 2016

We confirm the following trade Sold

Quantity 1,170

Price* $71.50

Gross amount $83,655.00

$5.55

Commission/sales charge

Other fees/charges

$75.00

Amount credited $83,574.45

XYZ COM UNSOLICITED SYMBOL XYZ CUSIP NO. 123456789

AccountTrade dateLocation of execution Settlement date UBS capacity Reference no.

XY 1234512/15/16NYSE12/20/2016Agent35342

An affiliate of UBS Financial Services Inc. makes a market in this security and may have acted as principal.*See the Average Price Trade Explanation.

Account Proceeds from Broker and Barter Exchange Transactions

2016 1099-B* XX/XX/XXXX

Sales transactions are grouped by their term (long, short or undetermined) and covered status (covered or noncovered). For tax lots whose term is undetermined, use your historical documents to establish the cost basis and date of purchase. Tax lots with an additional notation of "Ordinary" represent neither short- nor long-term capital transactions. You may wish to consult with your tax advisor, the IRS or your state tax authority regarding the proper treatment.Closing of written options is presented in a distinct manner in accordance with IRS regulation. For these transactions the Cost or other basis (column 1e) is always presented as $0.00 and the Proceeds (column 1d) is the net of proceeds received when the option was written and the cost to close the position.

Several column headings describe two related items: a quantity and a qualifier. For example, proceeds and, if the sale is the result of an option exercise or assignment, whether the proceeds are gross or net (adjusted for any option premium). When these conditions exist, the qualifier is shown to the right of the amount.

FATCA filing requirement [ ]

SHORT TERM TRANSACTIONS FOR COVERED TAX LOTS [Ordinary gains or losses are identified in the Additional information column] (Lines 2 & 5) Report on Form 8949, Part I with Box A checked. Basis is provided to the IRS. (Line 3)“Gain or loss (-)” and “Additional information” are NOT reported to the IRS.

1a- Description of property/CUSIP/Symbol

1c- Datesold ordisposed Quantity

1d- Proceeds &6- Reported

(G)ross or (N)et1b- Dateacquired

1e- Cost orother basis

1f- Accrued mkt disc (D) 1g- Wash sale loss disallowed (W)

Gain or loss(-) & 7- Loss not allowed (X) also note reports (Z)

Additional information

XYZ CORP COMMON STOCK/ CUSIP: 12345678 / Symbol: XYZ

12/15/16 1,170.00 83,574.45 12/15/2016 31,075.20 ... ... Sale 26

UBS FINANCIAL SERVICES INC. XY12345

First,locatethe“Amountcredited” 2 on your UBSTradeConfirmation(shownatleft).

(“Amountcredited”isalsoreferredtoas“Proceeds” onIRSForm8949andForm1040,ScheduleD.)


6




reported to IRS. Adjustments willbe needed on Form 8949 in Step 3,as basis on Form 1099-B can nolonger include the taxable income atexercise. (See footnote on page 4 formore details.)




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2




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* Basis of shares sold for Form 1099-B reporting purposes is the grant price for the 1,170 shares used to cover the exercise cost and taxes at exercise,and commission/fees for sale.

ab Confirmation





December 20, 2016


Quantity 1,170

Price* $71.50


$5.55


Other fees/charges

$75.00




XY 1234512/15/16NYSE12/20/2016Agent35342


Account Proceeds from Broker and Barter Exchange Transactions

2016 1099-B* XX/XX/XXXX











Gain or loss(-) & 7- Loss not allowed (X) also note reports (Z)

Additional information

XYZ CORP COMMON STOCK/ CUSIP: 12345678 / Symbol: XYZ

12/15/16 1,170.00 83,574.45 12/15/2016 31,075.20 ... ... Sale 26

UBS FINANCIAL SERVICES INC. XY12345

*BasisofsharessoldforForm1099-Breportingpurposesisthegrantpriceforthe1,170sharesusedtocovertheexercisecostandtaxesatexercise,andcommission/feesforsale.

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5

6

7

8

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5

6 2 7 7 83 1 4

1,170 shares, XYZ Company 12/15/16 12/15/16 $83,574.45 $31,075.20 B ($52,579.80) ($80.55)

Step 3Complete Form 8949 TofilloutIRSForm8949,usetheinformation youpulledfrom:

•YourUBSTradeConfirmation•Form1099-B

Sinceinthisexample,non-qualifiedstockoptionsharesweresoldbeforeoneyear,youreportthegainsasa short-termtransactioninPartIonForm8949.

Check(A)underPartI

Incolumn(a),enteradescription,i.e.,“1,170shares,XYZcompany”

Anadjustmentisneededforthetaxableincomenot partofthebasisreportedtotheIRS.Incolumn(f),enter“B”toindicatethatthebasisshowninbox1eof the1099-Bandcarriedintocolumn(e)ofForm8949isnotcompleteandisthereasonforthe adjustmentof$52,579.80enteredincolumn (g) ofForm8949.Theamountoftheadjustmentequalsthepershare exercisespread(W-2income)timesthe numberof sharessold.

Subtracttheamountincolumn(e)andtheamountincolumn(g)fromtheamountincolumn(d)todeterminecapitalgain orloss,inthiscasealossof $80.55

8


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7

8

1 4 7 8

Leave Part II blank.

Step 4Complete Schedule D (Form 1040)

ScheduleDbringstogetherthetotalsfromForm8949.Inthisexample,sinceshareswereheldforoneyearorless afterexercise,thetransactionisconsideredashort-termcapitalgainorloss.Therefore,filloutPartIonly.(Heldyoursharesformorethanoneyear?SimplyfillinPartIIonScheduleD,andleavePartIblank.)In each appropriate section, as part of the total, enter information fromForm 8949 as followsinrow1b:

• Proceedsfromcolumn(d)• Costorotherbasisfromcolumn(e)• Amountofadjustmentfromcolumn(g)• Gainorlossfromcolumn(h)

CompletetheremainderofScheduleD.

Held your shares for more than one year?SimplyfillinPartIIonScheduleD,andleavePartIblank.

9


Withnon-qualifiedplans,youhavepotentialtaximplications at two points in time: 1) Attimeofexercise2) Whenyousellyourshares

Inthisexample,wewillgothroughthefourstepstoreportyourtaxableordinaryincomeandcapitalgainsor lossesonyourtaxeswhenyousellallofthesharesat exercise.• Step 1:Determineyourtaxableordinaryincome• Step 2:Determinecapitalgainsandlosses• Step 3:CompleteForm8949• Step 4:CompleteScheduleD(Form1040)

Forthisexample,youneed:•UBSAdvice(s)ofExercise• UBSTradeConfirmation• Form1099-B• IRSForm8949• ScheduleD(Form1040)

Example2:Non-qualifiedstockoptionplan (NQO)inacashlessexercise/same-daysale of all shares

Assumptions for Example 2:•Basesalary:$120,000•Exercisedate:12/15/16•Sharesexercised:2,025•Marketvaluepershareon exercisedate:$71.50

•Grantprice:$26.56•Spread:$44.94•Saledate:12/15/16•Salepricepershare:$71.50


Taxableordinaryincomeistheportionofyourtransactionthatistaxedasincomeratherthanacapitalgainorloss.ConsultyourUBSAdvice(s)ofExerciseforthisinformation.


$91,003.50

9


With non-qualified plans, you have potential tax implications at two points in time: 1) At time of exercise2) When you sell your shares

In this example, we will go through the four steps to report your taxable ordinary income and capital gains or losses on your taxes when you sell all of the shares at exercise.


Example 2: Non-qualified stock option plan (NQO) in a cashless exercise/same-day sale of all shares

Assumptions for Example 2:• Base salary: $120,000• Exercise date: 12/15/16• Shares exercised: 2,025• Market value per share on

exercise date: $71.50• Grant price: $26.56

• Sale date: 12/15/16• Sale price per share: $71.50


Taxable ordinary income is the portion of your transaction that is taxed as income rather than a capital gain or loss. Consult your UBS Advice(s) of Exercise for this information.


$91,003.50

a

a

For this example, you need:• UBS Advice(s) of Exercise• UBS Trade Confirmation• Form 1099-B• IRS Form 8949• Schedule D (Form 1040)

December 20, 2016 Page 1 of 1 Advice of ExerciseUBS Financial Services Inc. UBS Equity Plan Advisory Services 315 Deaderick Street Nashville, TN 37238

This is to confirm that on December 20, 2016, we settled your exercise of 2025 options of XYZ Corporation Stock.Details of the options exercised follow:The amount ($83.99)will be deposited to your UBS Financial Services Inc. account as instructed.



Net Payment

00001234508/07/2010

NQO12/15/2016

2,0252,025

0$ 26.56$ 53,784.00$ 71.50$ 71.50$ 144,787.50$ 91,003.50

$( 22,750.88)$( 0.00)$( 4,001.60)$( 0.00)$( 1,319.55)$( 1,714.98)$( 0.00)$( 29,787.01)$( 75.00)$( 5.25)$( 0.30)$ 61,135.94

Total

2,0252,025

0

$ 53,784.00

$ 144,787.50$ 91,003.50

$( 22,750.88)$( 0.00)$( 4,001.60)$( 0.00)$( 1,319.55)$( 1,714.98)$( 0.00)$( 29,787.01)$( 75.00)$( 5.25)$( 0.30)

$ 61,135.94$( 0.00)$ 0.00

$ 61,135.94

• Spread: $44.94

a

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•Dateacquired•Datesold•Costorotherbasisamounts 5 * reportedtoIRS.Adjustmentswillbe neededonForm8949inStep 3,asbasisonForm1099-Bcannolongerincludethetaxableincomeatexercise.(Seefootnoteonpage4formoredetails.)

Enter each of these numbers on IRS Form 8949, as shown on the next page.



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reported to IRS. Adjustments areneeded on Form 8949 in Step 3, asbasis on Form 1099-B can no longerinclude the taxable income atexercise. (See footnote on page 4 formore details.)




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* Basis of shares sold for Form 1099-B reporting purposes is the grant price for the 2,025 shares sold at exercise, and commission/fees for sale.

ab Confirmation





December 20, 2016


Quantity 2,025

Price* $71.50


$5.55


Other fees/charges

$75.00





XY 1234512/15/16NYSE12/20/2016Agent35342

34 5

Proceeds from Broker and Barter Exchange Transactions

2016 1099-B* XX/XX/XXXX










1f- Accrued mkt disc (D) 1g- Wash sale loss

disallowed (W)

Gain or loss(-) & 7- Loss not allowed (X)also not reported (Z) Additional information

XYZ CORP COMMON STOCL/ CUSIP: 12345678 / Symbol: XYZ

12/15/16 2,025.00 144,706.95 12/15/2016 53,784.00 ... ... Sale 26

UBS FINANCIAL SERVICES INC. Account XY12345




10




reported to IRS. Adjustments areneeded on Form 8949 in Step 3, asbasis on Form 1099-B can no longerinclude the taxable income atexercise. (See footnote on page 4 formore details.)




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2




* Basis of shares sold for Form 1099-B reporting purposes is the grant price for the 2,025 shares sold at exercise, and commission/fees for sale.

ab Confirmation





December 20, 2016


Quantity 2,025

Price* $71.50


$5.55


Other fees/charges

$75.00





XY 1234512/15/16NYSE12/20/2016Agent35342

34 5

Proceeds from Broker and Barter Exchange Transactions

2016 1099-B* XX/XX/XXXX










1f- Accrued mkt disc (D) 1g- Wash sale loss

disallowed (W)

Gain or loss(-) & 7- Loss not allowed (X)also not reported (Z) Additional information


12/15/16 2,025.00 144,706.95 12/15/2016 53,784.00 ... ... Sale 26

UBS FINANCIAL SERVICES INC. Account XY12345

*BasisofsharessoldforForm1099-Breportingpurposesisthegrantpriceforthe2,025sharessoldatexercise,andcommission/feesforsale.

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Step 3Complete Form 8949 TofilloutIRSForm8949,usetheinformationyou pulledfrom:

•YourUBSTradeConfirmation•YourForm1099-B

Sinceinthisexample,non-qualifiedstockoptionplansweresoldbeforeoneyear,youreportthegainsasa short-termtransactioninPartIonForm8949.

Check(A)underPartI

Incolumn(a),enteradescription,i.e.,“2,025shares,XYZcompany”

Anadjustmentisneededforthetaxableincomenot partofthebasisreportedtotheIRS.Incolumn(f),enter“B”toindicatethatthebasisshowninbox1eof the1099-Bandcarriedintocolumn(e)ofForm8949isnotcompleteandisthereasonfortheadjustmentof$91,003.50enteredincolumn(g)ofForm8949.Theamountoftheadjustmentequalsthepershare exercisespread(W-2income)timesthe numberof sharessold.

Subtracttheamountincolumn(e)andtheamountincolumn(g)fromtheamountincolumn(d)todeterminecapitalgain orloss,inthiscasealossof $80.555

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6 2 7 7 83 1 4

2,025 shares, XYZ Company 12/15/16 12/15/16 $144,706.95 $53,784 B ($91,003.50) ($80.55)

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7

8

2 5 7 8

Leave Part II blank if

shares were held for one year or less


ScheduleDbringstogetherthetotalsfromForm8949.Inthisexample,sinceshareswereheldforoneyearorless afterexercise,thetransactionisconsideredashort-termcapitalgainorloss.Therefore,filloutPartIonly.(Heldyoursharesformorethanoneyear?SimplyfillinPartIIonScheduleD,andleavePartIblank.)In each appropriate section, as part of the total, enter information fromForm 8949 as followsinrow1b:


CompletetheremainderofScheduleDand reportappropriatelyonForm1040.

Held your shares for more than one year?SimplyfillinPartIIonScheduleD,andleavePartIblank.

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Inthisexample,wewillgothroughthefourstepstocalculateyourordinaryincomeandcapitalgainsorlossesonsaleswhereyouhaveaqualifyingdisposition,meaningyoumetyourplan’sholdingperiod(see page3).


Forthisexampleyouneed:•UBSAdvice(s)ofExercise•UBSTradeConfirmation•W-2•Form1099-B•ScheduleD(Form1040)•Form8949

Only exercised ISO shares in 2016?NoneedtoreportanythingtotheIRS.Withincentivestockoptionplans,youareonlytaxedwhenyoudisposeofshares.

Example3:Incentivestockoptionplan(ISO)withqualifyingdisposition

Assumptions for Example 3:•Basesalary:$50,000•Exercisedate:10/10/11•Sharesexercised:750•Marketvaluepershareon exercisedate:$71.50•Grantprice:$31.875•Saledate:12/14/16•Salepricepershare:$71.50


InaqualifyingdispositionofanISO,the income from the sale of shares willbetaxedasacapitalgain.Youwillnothaveanytaxableordinaryincome.PleaseproceedtoStep2.

Important: Are you subject to the Alternative Minimum Tax (AMT)?YourtaximplicationsmaydifferentifyoupaytheAMT.Pleaseconsultyourpersonaltaxadvisor.

TheAlternativeMinimumTax(AMT)mayapply.Itisimportantyouconsultataxadvisorconcerningyourindividualcircumstances.

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Next,locatethefollowinginformation on your Form1099-B(shownatright).

•Dateacquired•Datesold•Costorotherbasisamounts







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• Date acquired• Date sold• Cost or other basis amounts







34

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ab Confirmation



Send checks/correspondence to: UBS FINANCIAL SERVICES INC. 1000 Harbor Blvd Weehwaken, NJ 07086


December 19, 2016


Quantity 750

Price* $71.50


$5.55


Other fees/charges

$75.00




XY 1234512/14/16NYSE12/19/2016Agent35342


34 5

Account XY 12345 Proceeds from Broker and Barter Exchange Transactions

2016 1099-B* XX/XX/XXXX










1f- Accrued mkt disc (D) 1g- Wash sale

disallowed (W)

Gain or loss(-) & 7- Loss not allowed (X) also not reported (Z) Additional information


12/14/16 7500.00 53,544.45 10/10/2011 23,906.25 ... ... Sale 26

UBS FINANCIAL SERVICES INC.

14










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ab Confirmation



Send checks/correspondence to: UBS FINANCIAL SERVICES INC. 1000 Harbor Blvd Weehwaken, NJ 07086


December 19, 2016


Quantity 750

Price* $71.50


$5.55


Other fees/charges

$75.00




XY 1234512/14/16NYSE12/19/2016Agent35342


34 5


2016 1099-B* XX/XX/XXXX










1f- Accrued mkt disc (D) 1g- Wash sale

disallowed (W)



12/14/16 7500.00 53,544.45 10/10/2011 23,906.25 ... ... Sale 26


15


Form 8949 (2015) Attachment Sequence No. 12A Page 2Name(s) shown on return. Name and SSN or taxpayer identification no. not required if shown on other side Social security number or taxpayer identification number

Before you check Box D, E, or F below, see whether you received any Form(s) 1099-B or substitute statement(s) from your broker. A substitute statement will have the same information as Form 1099-B. Either will show whether your basis (usually your cost) was reported to the IRS by your broker and may even tell you which box to check.

Part II Long-Term. Transactions involving capital assets you held more than 1 year are long term. For short-term transactions, see page 1. Note: You may aggregate all long-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS and for which no adjustments or codes are required. Enter the totals directly on Schedule D, line 8a; you aren't required to report these transactions on Form 8949 (see instructions).

You must check Box D, E, or F below. Check only one box. If more than one box applies for your long-term transactions, complete a separate Form 8949, page 2, for each applicable box. If you have more long-term transactions than will fit on this page for one or more of the boxes, complete as many forms with the same box checked as you need.

(D) Long-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS (see Note above)(E) Long-term transactions reported on Form(s) 1099-B showing basis was not reported to the IRS(F) Long-term transactions not reported to you on Form 1099-B

1

(a) Description of property

(Example: 100 sh. XYZ Co.)

(b) Date acquired (Mo., day, yr.)

(c) Date sold or disposed of

(Mo., day, yr.)

(d) Proceeds

(sales price) (see instructions)

(e) Cost or other basis. See the Note below and see Column (e)

in the separate instructions

Adjustment, if any, to gain or loss. If you enter an amount in column (g),

enter a code in column (f). See the separate instructions.

(f) Code(s) from instructions

(g) Amount of adjustment

(h) Gain or (loss).

Subtract column (e) from column (d) and combine the result

with column (g)

2 Totals. Add the amounts in columns (d), (e), (g), and (h) (subtract negative amounts). Enter each total here and include on your Schedule D, line 8b (if Box D above is checked), line 9 (if Box E above is checked), or line 10 (if Box F above is checked) ▶

Note: If you checked Box D above but the basis reported to the IRS was incorrect, enter in column (e) the basis as reported to the IRS, and enter an adjustment in column (g) to correct the basis. See Column (g) in the separate instructions for how to figure the amount of the adjustment.

Form 8949 (2015)

✔


•YourUBSTradeConfirmation•YourForm1099-B

Sincethisexampleisforaqualifieddisposition,meaningyoumettheholdingperiodbysellingyourshares1+yearsafteryourexercisedateand2+afteryourgrantdate,itisalong-termtransaction.ReportitinPartIIonForm8949.

Check(D)underPartII

Incolumn(a),enteradescription,i.e.,“750shares,XYZcompany”

Sincetherearenochangestothebasisprovided,leavecolumns(f)and(g)blank

Subtracttheamountincolumn(e)fromtheamountincolumn(d)todeterminecapitalgainorloss,inthiscaseagainof$29,638.20

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750 shares, XYZ company 10/10/11 12/14/15 $53,544.45 $23,906.25 $29,638.20

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ScheduleDbringstogetherthetotalsfromForm8949.Inthisexample,sincetheholdingperiodwasmet,thetransactionisconsideredalong-termcapitalgainorloss.Therefore,filloutPartIIonly.Ineachappropriatesection,aspartofthetotal,enterinformationfromForm8949asfollowsinrow8b:


CompletetheremainderofScheduleDandreportappropriatelyonForm1040.

2 5 8 9

Leave Part I blank.

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Inthisexample,wewillgothroughthefourstepstocalculateyourordinaryincomeandcapitalgainsorlossesonsaleswhereyouhaveadisqualifyingdisposition,meaningyoudidnotmeetyourplan’sholdingperiod(seepage3).


Forthisexampleyouneed:•UBSAdvice(s)ofExercise•UBSTradeConfirmation•W-2•Form1099-B•ScheduleD(Form1040)•Form8949

Only exercised ISO shares in 2016?NoneedtoreportanythingtotheIRS.Withincentivestockoptionplans,youareonlytaxedwhenyoudisposeofshares.

Example4:Incentivestockoptionplan(ISO) withdisqualifyingdisposition

CalculationTotalmarketvalueonexercisedate a $53,625.00Minustotaloptionexercisecosts b –$23,906.25

Taxable ordinary income ( a - b ) $29,718.75 1Enter this number on IRS Form 8949, Part I, column (g) as shown on page 19.

Assumptions for Example 4:•Basesalary:$50,000•Exercisedate:12/30/15•SharesExercised:750•Marketvaluepershareon exercisedate:$71.50

•Grantprice:$31.875•Saledate:12/14/16•Salepricepershare:$71.50


Taxableordinaryincomeistheportionofyourtransactionthatistaxedasincomeratherthanacapitalgainorloss.ConsultyourUBSAdvice(s)ofExercisetocalculatethisamount.Usually,companiesdonotwithholdtaxesatthe time of exercise, so participants are responsibleforremitting thetaxliability.

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In this example, we will go through the four steps to calculate your ordinary income and capital gains or losses on sales where you have a disqualifying disposition, meaning you did not meet your plan’s holding period (see page 3).


Only exercised ISO shares in 2016?No need to report anything to the IRS. With incentive stock option plans, you are only taxed when you dispose of shares.

For this example you need:

• UBS Advice(s) of Exercise• UBS Trade Confirmation• W-2• Form 1099-B• Schedule D (Form 1040)• IRS Form 8949

Example 4: Incentive stock option plan (ISO) with disqualifying disposition

CalculationTotal market value on exercise date a $53,625.00Minus total option exercise costs b – $23,906.25

Taxable ordinary income ( a - b ) $29,718.75 1Enter this number on IRS Form 8949, Part I, column (g) as shown on page 19.

Assumptions for Example 4:• Base salary: $50,000• Exercise date: 12/21/15• Shares Exercised: 750• Market value per share on

exercise date: $71.50• Grant price: $31.875• Sale date: 12/14/16• Sale price per share: $71.50


Taxable ordinary income is the portion of your transaction that is taxed as income rather than a capital gain or loss. Consult your UBS Advice(s) of Exercise to calculate this amount. Usually, companies do not withhold taxes at the time of exercise, so participants are responsible for remitting the tax liability.

The Alternative Minimum Tax (AMT) may apply. It is important you consult a tax advisor concerning your individual circumstances.

a

December 19, 2016 Page 1 of 1 Advice of ExerciseUBS Financial Services Inc. UBS Equity Plan Advisory Services 315 Deaderick Street Nashville, TN 37238

This is to confirm that on December 19, 2016, we settled your exercise of 750 options of XYZ Corporation Stock.Details of the options exercised follow:The amount ($29,638.20) will be deposited to your UBSFinancial Services Inc. account as instructed.



Net Payment

00001234508/07/2010

ISO12/14/2016

750750

0$ 31.875$ 23,906.25$ 71.50$ 71.50$ 53,625.00$ 29,718.75

$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 75.00)$( 5.25)$( 0.30)$ 29,638.20

Total

750750

0

$ 23,906.25

$ 53,625.00$ 29,718.75

$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 0.00)$( 75.00)$( 5.25)$( 0.30)

$ 29,638.20$( 0.00)$ 0.00

$ 29,638.20

TheAlternativeMinimumTax(AMT)mayapply.Itisimportantyouconsultataxadvisorconcerningyourindividualcircumstances.

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•Dateacquired•Datesold•Costorotherbasisamountsreported toIRS.AdjustmentswillbeneededonForm8949inStep3,asbasisonForm1099-Bcannolongerincludethetaxableincomebasedonthespreadatexercise.




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reported to IRS. Adjustments willbe needed on Form 8949 in Step3, as basis on Form 1099-B can nolonger include the taxable incomebased on the spread at exercise.



When you sell shares, you realize a capital gain or loss. You will need to report that amount on your taxes.

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ab Confirmation





December 19, 2016


Quantity 750

Price* $71.50


$5.55


Other fees/charges

$75.00




XY 1234512/14/16NYSE12/19/2016Agent35342


34 5


2016 1099-B* XX/XX/XXXX













12/14/16 750 53,544.45 12/21/2015 23,906.25 ... ... Sale 26





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reported to IRS. Adjustments willbe needed on Form 8949 in Step3, as basis on Form 1099-B can nolonger include the taxable incomebased on the spread at exercise.



When you sell shares, you realize a capital gain or loss. You will need to report that amount on your taxes.

34

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ab Confirmation





December 19, 2016


Quantity 750

Price* $71.50


$5.55


Other fees/charges

$75.00




XY 1234512/14/16NYSE12/19/2016Agent35342


34 5


2016 1099-B* XX/XX/XXXX













12/14/16 750 53,544.45 12/21/2015 23,906.25 ... ... Sale 26


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•YourUBSAdvice(s)ofExercise •YourUBSTradeConfirmation•YourForm1099-B

Sincethisexampleisforadisqualifyingdisposition,meaningthesaletookplacebeforeoneyearfromtheexercisedate,youreportthisasashort-termtransactioninPartIonForm8949.

Check(A)underPartI

Incolumn(a),enteradescription,i.e.,“750shares,XYZcompany”

Anadjustmentisneededforthetaxableincomenot partofthebasisreportedtotheIRS.Pleaserefertothecalculationonpage17.Incolumn(f),enter“B”toindicatethatthebasisshowninbox1eofthe1099-Bandcarriedintocolumn(e)ofForm8949isnotcompleteandisthereasonfortheadjustmentof$29,718.75enteredincolumn(g)ofForm8949.

Subtracttheamountincolumn(e)andtheamountincolumn(g)fromtheamountincolumn(d)todeterminecapitalgainorloss,inthiscasealossof $80.55

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750 shares, XYZ Company 12/21/16 12/14/16 $53,544.45 $23,906.25 B ($29,718.75) ($80.55)

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Inthisexample,sincetheshareswereheldforoneyearorless,thetransactionisconsideredashort-termcapitalgain orloss.Therefore,fill outPartIonly.Ineachappropriatesection,aspartof thetotal,enterinformationfromForm8949as follows inrow1b:


CompletetheremainderofScheduleD.

2 5 1 9

Leave Part II blank.

UBS tax disclosureUBSGroupAGanditsAffiliatesdonotprovidetaxadvice.Accordingly,anydiscussionofU.S.taxmatterscontainedherein(includinganyattachments)isnotintendedorwrittentobeused,andcannotbeused,inconjunctionwiththepromotion,marketingorrecommendationbyanyoneunaffiliatedwithUBSGroupAGoranyofthemattersaddressedhereinorforthepurposeofavoidingU.S.tax-relatedpenalties.

©UBS2017.ThekeysymbolandUBSareamongtheregisteredandunregisteredtrademarksofUBS.Allrightsreserved.UBSFinancialServicesInc.is asubsidiaryofUBSGroupAG.MemberFINRA/SIPC.

UBSFinancialServicesInc.ubs.com/fs170119-0109

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