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Subject:   Can I claim an AMT credit?
Date:   Mon, 03 Apr 2006
From:   Jay

Hi Mike,

I exercised ISOs and held the stock during 2004, resulting in an AMT. I still haven't sold the stock.

According to my 2005 tax calculations, I don't have an AMT for 2005. Can I claim a refund for AMT credit from 2004?

On Turbo Tax, line 2 (exclusion items) of Form 8801 includes the amount from exercise of an ISO. Based on the instructions, I'm not sure that's right.

Regardless of the refund, do I have to file Forms 6251 and 8801 for 2005?

Thanks,
Jay

Answer

Date:   Wed, 14 Jun 2006

Hello Jay,

The amount from exercise of an ISO should not be included on Form 8801, line 2.

I recommend that you include Forms 6251 and 8801 to correctly compute your AMT credit carryover to 2006. Since you don't have an AMT for 2005, you might get a little AMT credit on your 2005 income tax return.

Why do employees who exercise and sell ISO stock continue to use Turbo Tax? How complex does a tax return have to be before you decide it's time to get professional help?

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options - Executive Tax and Financial Planning Strategies.

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.