AMT and Equity Compensation
Alternative minimum tax, nonqualified stock options, incentive stock options and other forms of equity compensation.
ISO Disqualifying Disposition and AMT question
Posted by: gonegolfin, March 11, 2011 02:12AM
I have dealt with ISOs and the AMT for many years. But this is the first time I have had the below scenario and I am not clear concerning the correct way to represent this on my AMT version of the Schedule D (and subsequently Line 17 of the 6251 AMT form).

On 7/20/09, I exercised 19 ISOs at $1.78 when FMV was $18.87. This resulted in an AMT adjustment of $324.71 (($18.87 - $1.78)*19 shares). This adjustment was accounted for properly on Line 15 of my 2009 Form 6251 (Excercise of ISOs - excess of AMT income over regular tax income). My AMT basis was now $358.53 ($324.71 + $33.82).

I did not sell the shares in 2009 ... thus I did not sell the shares at the same FMV of $18.87 above. I sold the shares on 1/5/10 for $29.75. Therefore, the FMV of $18.87 minus the purchase cost of $1.78 is declared as ordinary income (reported on my W-2) for 2010. This amount comes to $324.71. I reported the difference between the sale price ($29.75) and new cost basis ($18.87) as a short term capital gain on my *regular tax Schedule D*. That is, the "Sales Price" entry on the Schedule D is $565.25 and the "Cost" is $358.53, for a short term capital gain of $206.72.

My question is ... what should I declare for the *AMT version of the Schedule D* ... and is there an adjustment to be made on the 2010 Form 6251 Line 17 (Disposition of property - difference between AMT and regular tax gain or loss)? Recall that I had an AMT adjustment of $324.71 on my 2009 Form 6251 Line 15.

That is, do I declare the same "Cost" ($358.53) on my *AMT version of the Schedule D* as I did the *regular tax Schedule D*? Or do I add the adjustment made in 2009 ($324.71) to arrive at an AMT cost basis of $683.24?

Much Thanks,
Brian



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