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Subject:   AMT credit strategy
Date:   Mon, 3 Sep 2001
From:   Matt

Hello,

Due to my lack of knowledge of AMT I ended up paying $XXK in AMT taxes due to exercise and hold of my ISOs.

I am assuming that my goal now should be to recover quickly by using the AMT credit that could result this year. My thinking is that it is better to have the money I have paid to start working for me again instead of the IRS.

Questions 1: Is this a correct strategy?

Questions 2: In order to maximize the credit applied to year 2001's tax year, should I sell the options I exercised a year ago and possibly turn around and buy them back again?

Your guidance would be appreciated.

Regards,

Matt

Answer

Date:   Fri, 7 Sep 2001

Hello Matt,

Sorry, I can’t give you specific advice, because the answers depend on your personal situation, the stock you are dealing with, etc.

Don’t panic. Think about what makes sense.

If you sell the stock and then immediately buy it back, you will have a wash sale for AMT reporting, thus defeating your purpose. You must wait more than 30 days to repurchase the stock.

Why buy the stock again if it’s a loser? Does this make investment sense?

You should seek a good tax advisor to work with you.

Good luck!

Mike Gray

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.