Cost Basis for Shares Acquired After Jan. 1, 2011

Overview

This discussion should not be considered as a source document or as proof of your tax liability. Specific questions about your cost basis and your particular tax situation should be referred to your tax advisor.

• Form 1099-B
• Cost Basis
• Wash Sales
• Wash Sales Examples

Effective Jan. 1, 2011, all brokers, transfer agents and employee plan administration agents are required to track and report cost basis for certain new shares acquired after January 1, 2011. Previously, tracking cost basis information was the sole responsibility of the stockholder. Beginning in 2011, this burden was shifted from the individual to the brokers and agents for certain new stock acquisitions and will make it easier to accurately report capital gains or losses upon the sale or other disposition of shares.

As SAIC's stock transfer agent and employee plan administrator, Computershare Shareowner Services ("Computershare") is in compliance with these new regulations and tracks cost basis for certain new shares acquired after January 1, 2011, in both the Equity Holdings account (fully vested common stock account) and the Employee Stock Purchase Plan (ESPP) account. This cost basis information will be maintained in back-end systems at Computershare and will be reported when you sell or otherwise dispose of these shares.

Form 1099-B

Information regarding any stock sold is reported on a Form 1099-B. The information provided on the Form 1099-B will depend on whether you sold "covered shares" or "non-covered shares." Generally, at SAIC, covered and non-covered shares may be acquired as follows:

Covered Shares

• Shares acquired through the ESPP after Jan. 1, 2011
• Shares acquired through a cash exercise of an option after Jan. 1, 2011
• Shares acquired through the cashless hold exercise of an option after Jan. 1, 2011

Non-Covered Shares

• Shares acquired through the stock swap exercise of an option
• Shares acquired through the vesting of a Restricted Stock Award
• Shares distributed from either of the Stock Compensation, the Key Executive Plan or the Retirement Plan
• Shares acquired prior to Jan. 1, 2011 under any method

If you sold "covered shares" from either your Equity Holdings account or your ESPP account, the Form 1099-B will provide the following information:

1. Acquisition date of shares sold;
2. Sales proceeds less transaction fees and brokerage commissions;
3. Cost basis of the shares sold;
4. The amount of any wash sale loss disallowed; and
5. An indication of whether the gain or loss is short or long term.

If you sold non-covered shares, the Form 1099-B will only report the sales proceeds less transaction fees and brokerage commissions. For these noncovered security sales, stockholders will need to calculate the short- or long-term gain or loss on the transaction based on their own cost basis records.

If you sold both covered and non-covered shares from the same account, you will only receive one Form 1099-B with information on all of the sale transactions. However, the Form 1099-B will segregate your sales between non-covered shares, covered shares resulting in a short-term gain/loss and covered shares resulting in a long-term gain/loss.

If you sold shares from both your Equity Holdings and your ESPP accounts, you will receive separate Form 1099-Bs which reflect sale transactions from each of these accounts.

If you sold shares through Computershare either through the Share Selling Program or through the Employee Stock Purchase application, Computershare will provide a Form 1099-B to you by Feb. 15 of the current year for the previous tax year. If you sold shares through your own broker, your broker will provide a Form 1099-B to you.

Cost Basis

Generally, the cost basis of stock will be the original acquisition cost, including any transaction fees and commissions with certain possible adjustments and is used to calculate capital gains or losses upon the sale of the stock. Computershare will track cost basis for all covered shares. Although shares that vest from a restricted stock award after Jan. 1, 2011 are non-covered securities, the cost basis of these shares is available online via Computershare's Equity Access Portal on the Equity Holdings application or on your SAIC Common Stock Statement. For all other non-covered shares, stockholders will need to track their own cost basis. Please see the cost basis records.

Wash Sales

A "wash sale" is created when a stockholder has a qualified acquisition of shares in the same account within 30 days before or 30 days after (61-day period) a sale of a "covered lot" of shares, at a loss. If the sale is a wash sale, you cannot deduct any or a portion of the resulting loss if, within the period beginning 30 days before the date of the loss sale and ending 30 days after that date, you acquire "substantially identical" stocks or securities. However, the loss will generally be allowed to increase your cost basis in the "new stock" by the amount of loss that was disallowed. The holding period of the wash sale is added to the holding period of the "replacement shares."

Under the new regulations, the tracking and reporting of wash sales will now be reported by the broker or agent for covered securities. Previously, it was the stockholder's responsibility to track and properly report wash sales. For SAIC, wash sales will most likely occur for shares sold and purchased within the ESPP. If you sell shares from your ESPP account at a loss within 30 days prior to or after a quarterly ESPP purchase date, all or a portion of that loss will be disallowed and added to the cost basis of your newly purchased shares.

Wash Sales Examples

The following examples are presented for informational purposes only.