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Subject:  Getting back AMT on ISOs by donating them
Date:  Sat, 27 Mar 2004
From:  Kevin

Mike,

You were the top hit on a Google search for "ISO Stock Donation AMT"...

I purchased ISOs and paid the AMT a couple years ago. I would like to now donate those stock shares with the intention of:

1. getting the write off for current market value for the stock
2. getting back the prepaid AMT tax on them (since I donated them and therefore had no real taxable gain).

Is this doable? My current tax advisor tells me that we can't get back the AMT without there being an actual sale of the stock (or rather their software won't let them enter an adjustment to AMT without there being a sale of stock).

I appreciate your response.

Thanks!
Kevin

Answer

Hello Kevin,

Your tax advisor is correct. It is the sale of the stock that creates the difference between the tentative alternative minimum tax and the regular tax that enables you to apply the AMT credit. See Form 8801 and the related instructions.

The donation of appreciated ISO stock only makes sense when the tax benefits of the donation dwarf the potential benefit lost for the AMT credit. This will apply when the stock has increased dramatically in value after the ISO was exercised, and the taxpayer has met the holding period requirements for the stock.

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.