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Author: mathetes Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121572  
Subject: Re: AMT, ISO, and Cost Basis Questions Date: 2/17/1999 10:54 AM
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I don't know if anyone here can help me, but here's what happened. In 1993, I exercised a bunch of incentive stock options (ISO) at $1.60 a share, when the stock's FMV was $35 a share. The following year, I got hit by AMT (of course), and paid up a big chunk of money. In 1998, I sold the stock at $20 a share, and now I have to figure out whether my cost basis was $35 a share (since I already paid AMT on that amount) or $1.60 a share.

You figure your tax by using both bases in your calculations. Use $1.60 as the basis in the "normal" tax forms; then, for AMT purposes, you use $35.00 as the basis. Your normal tax forms will show a profit. But the AMT calculations will show a smaller gain (in fact, in your scenario, a loss) for the AMT calculation.

All other things being equal (assuming you don't have other extenuating circumstances), this means that your AMT tax (bottom line on that form) will be lower than your normal tax. And that means that, finally, you'll be able to take advantage of the AMT credit that you acquired back in filing the 1993 return.

mathetes
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