AMT and Equity Compensation
Alternative minimum tax, nonqualified stock options, incentive stock options and other forms of equity compensation.
Unrecovered AMT Credit
Posted by: Seven H, November 19, 2009 06:01PM
Taxpayers filed joint return in 2007 and paid AMT due to husband's exercise of stock option. Husband died at the end of 2008, did not use any of the AMT credit on the final joint 2008 return. Should wife carryforward the unrecovered AMT credit to her 2009 return?

Re: Unrecovered AMT Credit
Posted by: edcosoft, November 20, 2009 12:46AM
At first glance my advice would be to file an amended return 1040X for 2008 and attach 8801 and 6251 to take credit for the entire AMT carryover (if applicable).

Ed, author of the 2012 IRS form 2210 AI calculator. www.edcosoft.com/qitc.html

Re: Unrecovered AMT Credit
Posted by: Kaye Thomas, November 20, 2009 05:12AM
I'm not sure Ed and I are understanding the question the same way. I'm assuming the reason no AMT credit was used on the final joint 2008 return was that they didn't qualify to use any of it (presumably determined after preparing Form 8801). If that's the case, there's no reason to file an amended return for that year. You don't get to claim otherwise unused credit simply because one of the taxpayers died. At least, that's my position until Ed tells us what he saw in his quick glance.

As to whether the wife can carry this credit to her 2009 return, the answer is, um, let me look at the regulations . . . oh, that's right, there aren't any regulations! Well, it's only been 23 years since Congress created the AMT in its present form, so no hurry.

So, we have to make up an answer, and there's a reasonable argument either way. By analogy to other provisions, it would seem that an AMT credit attributable to husband's exercise of an ISO would not be allowed on the wife's return in a year after his death. At least, this is how I think it works when there's an unused NOL or foreign tax credit carryover from the final joint return. On the other hand, Form 8801 and its instructions seem to indicate you simply transfer numbers from the prior year's joint Form 8801 to a new 8801 filed single. That's probably not the theoretically correct result, but I don't see how the IRS could penalize you for doing what their forms and instructions tell you to do.

Kaye Thomas
Fairmark.com

Re: Unrecovered AMT Credit
Posted by: edcosoft, November 30, 2009 09:54PM
From OP 2008 is a Joint Return and there are credits they neglected take due to an ISO so there must have been a sale after hohlding a year (long term) or in 2008 (short term) that produced the credits? Anyway OP says they had recdoverable credits they didn't take.

I presumed that they neglected to file 8801 for 2008. Since it is joint return nothing prevents using the credits in 2008 (if they are allowable anyway), hence 1040X for 2008 my recommendation. The credits might be lost in 2009 (I don't really know, either). 2008 is a Joint return. I don't see why Kaye refers to a filed Single return.

Ed, author of the 2012 IRS form 2210 AI calculator. www.edcosoft.com/qitc.html

Re: Unrecovered AMT Credit
Posted by: Kaye Thomas, November 30, 2009 10:26PM
Ed, OP doesn't say they neglected to claim a credit they could have claimed. It says they "didn't use" the credit, which I interpret to mean they weren't able to use it due to the rule allowing this credit only to the extent regular income tax exceeds the tax calculated under AMT rules. If that's the case, the 2008 return (which is the final joint return) would show a carryover, and the question is whether the surviving spouse can use this carryover given that the deceased spouse was the one with the stock options. I'm referring to a single return because that's the question: does the credit carry over to the surviving spouse's single return.

Kaye Thomas
Fairmark.com

Re: Unrecovered AMT Credit
Posted by: edcosoft, December 1, 2009 04:52AM
<< paid AMT due to husband's exercise of stock option. Husband died at the end of 2008, did not use any of the AMT credit on the final joint 2008 return>>

So, you assumed it was a tax limitation and I assumed they forgot and sevenh forgot to check his web posting for comments.

Ed, author of the 2012 IRS form 2210 AI calculator. www.edcosoft.com/qitc.html

Re: Unrecovered AMT Credit
Posted by: Kaye Thomas, December 1, 2009 05:19AM
That about sums it up, though it could be that we scared them away.

Kaye Thomas
Fairmark.com



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