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Posted by ed on July 7, 2008, 1:47 pm
Please log in for more thread options On Jul 7, 9:59 am, "removeps-gro...@yahoo.com" <removeps-
gro...@yahoo.com> wrote:
>
> > An employee chooses to exercise stock options with a stock option buy price
> > of $20 on 8/1/2008 at a time the stock is trading for $27/share. In order
> > to get capital gains on the sale of the stock, it must be held for one year
> > after it is purchased. But if the employee holds the stock, they have an
> > alternative minimum tax problem based on the value of the stock at the time
> > they purchased it during the 2008 tax year. Is there any strategy to avoid
> > the AMT and get a capital gains treatment on the sale if the stock is held
> > for a year?
>
> There's an AMT tax credit, form 8801. Basically you calculate your
> AMT tax excluding stock options and a few other things, which will
> result in a lower AMT tax. They sometimes call this the alternative
> alternative minimum tax. The difference between the regular AMT and
> alternative AMT is your credit. You can use the credit in a future
> year. I don't get it because you pay tax one year and get it back the
> next year, so maybe someone else can claim how it works. There are
> limits of how much of the credit you can claim the following year, and
> unclaimed amounts may carry over to the following
year.http://www.fairmark.com/amt/credit.htmexplains it well.
>
> Also, the cost basis of stock sold in a future year may be different
> for the AMT. I could be way off here, but this is how I think it
> works by reading the instructions. For the regular tax the cost basis
> is $20, and for the AMT it is $27. If the stock is $29 when you sell
> in 2009 or a future year, then line 16 ("Disposition of property
> (difference between AMT and regular tax gain or loss)") would be -$7 a
> share because the regular gain is $9 and AMT gain is $2. The regular
> gain of $9 has been included in your regular AGI. This -$7 a share
> reduces your AMT taxable income. Long term gains and losses are not
> subject to AMT, and are still taxed at 15%, along with qualified
> dividends. However, a lower AMT taxable income increases the AMT
> exemption, and thereby lowers the AMT tax. But I don't understand how
> you can take both the credit and the cost basis.
>
> Anyone know if the Bush tax cut is phasing out the phaseout of the AMT
> exemption?
>
> The California AMT form is schedule P. I don't know what the AMT
> credit form is, or if there even is one.
>
> Finally, just to be sure, are these incentive stock options?
I was going to answer this but I think if removeps-gro... just
furnished the link to Farimark and left out the rest it would
suffice. ed
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