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Yes AMT is subject to $3,000 capital loss limitation. This common mistake when dealing with ISOs and AMT. Regulation 1.55-1 state that unless told otherwise AMT will follow the rules for regular tax.

You may want your friend to check out (as stated in the other posting) if you believe I am wrong on this.

"Remember the sale will not be reported on schedule D at all in this case (because it's on your W2 already)."

You still report the stock sale of the Sch. D for regular tax purposes because the taxpayer will get a 1099-B. The basis in the stock for regular tax will be the exercises price plus the amount included on the W-2, so they won't get double taxed. Generally this causes a short term loss because of commissions to sell the stock.

So it sounds like in the situation described the AMT adjustment on line 10 will $3,000.

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