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Sure, that's what us Fools are all about after all ;) I shall give it a go (I have been studying AMT for various reasons recently), but to read up go here:

http://www.fairmark.com/amt/ltcg.htm

From this article:

"But the way it works out, you may still pay AMT because of a large long-term capital gain."

...

"For example, if you're single and your income under the AMT rules is $112,500 or less, you're allowed an AMT exemption of $33,750. Normally that's enough to prevent you from paying AMT unless you're able to claim special tax benefits that reduce your regular tax. But suppose your income is around that level before you add a $150,000 capital gain (sale of a real estate investment, or stock, or perhaps sale of a business you built up). Your tax on the capital gain is 20% under both the regular tax and the AMT: $30,000. But under the AMT, the added income wiped out your AMT exemption."

Also, this type of AMT does not qualify for a credit - since it is not based on deferred income. Personally I have a huge problem with AMT, without giving too many details, I have a large portfolio of company stock options, and also a sizeable portfolio of company stock purchases. The first of the stock purchases is coming up for the one year one day rule for capital gains.

I am attempting to diversify my portfolio (which right now is all in company stock, and if you saw how much $$ I had tied up in this one stock you would have a heart attack) in the most tax efficient manner possible. Unfortunately, due to AMT, it seems this is simply not possible - though I have a decent income, the stock I have to sell would put me over the limit for AMT (I believe, still got to do the calculations) - my situation has the added complexity that I am never quite sure what I will earn in a year (due to bonuses etc.), so precise calculation of what I can afford to sell is nigh on impossible.

Also, I can only excercise a fraction of my options in one year without AMT giving me a tax bill based on a huge unrealized income that may very well go away, and since AMT appears to apply to capital gains income too, I had better not sell any of that type of stock that year either. Now moving on to the really awful part - even if I paid the AMT and got the AMT credit for the options, when I came to sell I would be liable to AMT under the capital gains income rules (I am supposing that the stock gains in value at the rate it has thus far), and that means I would not be able to use my credit - the credit can only be used in years you are not subject to AMT. What is truly frightenning about this, is that if you do very well and make your retirement income very good, Uncle Sam will kick you back down with AMT. Now if the AMT regulations, including the figures for its calculation continue to go unchanged to account for inflation, as it seems to have done for years and years, then that sum that that gets you AMT on your capital gains could well be very low compared to what is a livable income (my guess is that by that point this law will be repealed - if everybody gets shafted it will change). Nonetheless it is a frightenning prospect.

It strikes me that this tax must have bankrupted many people. For example, someone excercises $1,000,001 worth of stock options for say a $1. He pays the AMT tax ($280,000 on loan, since he has realized nothing to pay the tax with). Now he is the proud owner of a $280,000 AMT credit (which he's never likely to be able to cash in) and a $280,000 loan (perhaps a second morgage). Oh boy, how many who did something like this saw their stock crash before they actually realised any gain? If I knew anything about your US constitution (I'm a Brit), I could probably point out that it's unconstitutional to tax the people on what they *might* earn. Never heard of such a thing anywhere else, even in the darkest hours of British history - however unfair, those nasty Kings always taxed you based on something you had. This is the real Rock n Roll swindle in my view.

Did they shoot the guy who invented this tax? I'd like to volunteer :)

Disclaimer: I'm just a victim trying to find out how much of a victim I am, so any or all of this info may be innaccurate. And I have never, or intend to ever, shoot anyone :)

Hope something here helps.
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