Client's employer agreed to buy back a portion of client's non-qualified stock options to provide some liquidity to the client and retain the client as an employee. To execute the transaction, client exercised the options and immediately sold the stock back to the employer at the current FMV. By agreement, the employee agreed to pay the employer's share of FICA and the legal fees to execute the transaction, in addition to paying his own share of Federal, State, and FICA withholding. The proceeds (FMV minus strike price) were included in the client's W-2. No 1099 is being issued for the transaction as it was not done through a broker.
Question: Can the legal fees and employer share of FICA paid by the client be treated as selling expenses, thereby generating a capital loss on the transaction? They were a condition of selling and the employer treated them as part of the transaction, deducting them from the proceeds prior to distributing the net proceeds to the client.