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Subject:   NQs and AMT
Date:   Fri, 6 Oct 2000
From:   Usha

Hello Mike,

Let us say that I have an AMT credit of $X000 from my ISO stock exercise in 1998. If I now (November 2000) sold some Non Qual stocks only (not ISOs), should I still compute AMT (in addition to computing regualar tax) for tax year 2000?

If so, then if my AMT turns out to be more than regular tax, can I use the credit from the past? If not, is selling the ISOs that I exercised in 1998 the only trigger to compute AMT (in addition to the regular tax)?

Thanks for your reply.

Usha

Answer

Date:   4 Dec 2000

Hello Usha,

Yes.

Whenever you have an AMT credit carryover, always complete both the AMT form 6251 and AMT Credit form 8801 for years after the AMT was incurred.

This is the only way to correctly determine the correct credit used and carried over to the current and subsequent years.

Selling the shares is not the only way to recover the tax, but is the major way. Also, your credit carryover can be reduced for disallowed deductions. (See our article, "The Amazing Disappearing AMT Credit.")

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.