[logfromblammo]

It's worse. In some years, the gain when exercised was treated as ordinary income from your employer. So unless you filed a bunch of extra forms, the 0.40 per share might have been taxed as ordinary income on your W-2 from your employer, and also reported on a 1099 from your brokerage. Then it could have been reported again when you liquidated.

This is exactly what happened to me in 2002. The IRS wanted me to pay about 180% of what I actually earned from an options transaction in taxes. The employee stock purchase plan interaction only made it worse, thanks to the difference between long-term and short-term capital gains.

It was a complete CF, and made me ultra-paranoid about non-paycheck compensation forever after.

Don't just consult a professional. Form an angry mob and yell at some politicians. Try to get paid for your work with cash instead of options.