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My current situation is as follows:

I am holding about 50,000 options(fully vested), which I will exercising this year, and I will would like to know how I can exercise the options without having to pay alternative minimum tax. Hence, I will probably be selling the stock straight away, as well.
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If you'll be selling all the stock "straight away" you are very likely not to incur any AMT. The AMT adjustment for the exercise of ISOs "disappears" when you sell the stock in the same tax year you exercised the options and acquired the stock.

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LoTax
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Lotx replied: If you'll be selling all the stock "straight away" you are very likely
not to incur any AMT. The AMT adjustment for the exercise of ISOs
"disappears" when you sell the stock in the same tax year you
exercised the options and acquired the stock.


But what he didn't say was that the ORDINARY tax you'll incur is probably higher than the AMT so I suggest a better way (maybe).

Exercize the options, wait a year and sell the stock for a long term capital gain. The AMT tax will be due next April 15, you float a short term loan from 4/15/01 to 5/15/01 when you sell. The one month of interest will offset a little bit of the tax savings. The nifty way to do this is exercize BEFORE 4/15/ so you have the money from the gains to pay the AMT next April.

Of course there's the HORRIBLE problem if the stock price goes down in that year. For that reason you should exercize in early January. Then, if the price goes down you CAN sell for an ordinary gain in the same year and avoid the AMT and the capital loss limitation that would prevent you from recovering it. Ed
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hebronweisman: I am holding about 50,000 options(fully vested), which I will exercising this year, and I will would like to know how I can exercise the options without having to pay alternative minimum tax. Hence, I will probably be selling the stock straight away, as well.

edcosoft has already pointed out that you may be incurring a larger normal tax bite than the AMT would have been. He's right.

Your question/statement here seems to reveal an irrational fear of AMT. That AMT is a pain nobody will argue, but it is a known fact that people have encountered it and lived to tell the tale. It isn't the end of the world. It isn't even the worst thing that could happen. Think of it as pre-paying your long term capital gains, if you must. That's almost what it amounts to. But don't treat it as if it is to be avoided whatever the cost; that's foolish (lower case).

If you haven't read what tax attorney Kaye Thomas has to say on the topic, you owe it to yourself. Head over to www.fairmark.com.

mathetes
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