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Financial Planning / Tax Strategies


Subject:  question on amt, gifts, and basis Date:  1/23/2000  12:17 PM
Author:  weberh Number:  25803 of 127747

Here is my situtation:

In August 1999 my brother-in-law worked at an internet darling and had incentive stock options with a cost to him of $0.01/share. He exercised them (paid 0.01/sh and obtained the shares) before the ipo but just after another company bought a piece of his company for $12/share. This exercise triggered the AMT for him, and he had to pay a significant additional tax on the (12-0.01)/share.

In September 1999, he gifted me 500 shares which he had obtained through the exercise of his iso. That same week, another company bought a piece of his company for $15/share.

His claim was that my basis was $15/share -- I think he was confused about he difference between gifted and inherited shares. If there was no AMT involved, I would assume my basis would be 0.01/share. The AMT complicates things. I can't claim an AMT credit in future years because I did not pay the AMT (he did). On the other hand, my basis should not be 0.01 because tax has already been paid on part of the gain, so to have a 0.01 basis would be double taxation.

The other question is the holding period -- I am pretty sure my holding period starts the day after his exercise.

TMF -- any ideas for me? I have searched far and wide and found nothing. An answer would be helpful because there are about 16 other people who he did the same thing for.


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