I'm in AMT Hell - anyone understand how to recover AMT Credit from ISO exercise?

[JB]

If you don't know what AMT or ISOs are skip this (it'll make your head spin!)

If you understand how to recover AMT credit caused by an ISO exercise please help me. My head is spinning!

In 2000 an ISO exercise produced an AMT adjustment of $150K which caused $30K in AMT to be payed. Regular basis is $200. In subsequent years I used the AMT credit and now have $14K remaining. This year I sold the stock for $40,000. I'm trying to figure out how to draw down my remaining AMT credit as quickly as possible. So,

Reg Gain: 39,800
AMT Gain: -110,000 (40,000 - 150,000)

2006 AMT Gain: -3000 (limited)
2006 Adjustment: = -42800 (-3000 - 39800)
Form 6251 Line 16: -42800
2007 AMT Captital Loss Carryover = -107,000

If I plug these numbers in I get to use 7,000 in AMT credit, so I'll have 7,000 credit remaining. Since the law is changing for 2007, I should be able to use this credit over the next 2 years (5,000 then 2,000). I'll also have -3000 in AMT adjustments each year (line 16 6251) until the -107,000 is used. (That'll take 35 years!!)

It seems strange that I can't recoup my AMT credit after selling the original ISOs that caused the tax.
I'm not certain the above is correct. Can someone with better knowledge please confirm?

Thanks.

[clifp]

Without go over the numbers in great detail it looks like you are doing it correctly. I am less confident that your AMT capital loss carryover is being done correctly. Recovery period for AMT credits generated by ISO exercise are often in the decades, which is why Congress passed the law (actually they pass it for different reasons) to speed up the recover period.

But don't take my word it for Fairmark.com has lots of articles on AMT. Here is one
http://www.fairmark.com/amt/caplosstrap.htm, as well as wonderful forum. Although I suspect folks maybe more responsive after Tuesday.

[tryan]

Wow ... this is exactly why I 've used an accountant for the last 15+ years; $300 is a small price to pay.

[JB]

Thanks Clif! I got a good education over at Fairmark.com.

Tryan - I tried that route and it didn't work for me. Good for you if you found someone you can trust.

[audreyh1]

When I finally sold the stock I acquired via exercised ISO, I just used the AMT basis to calculate the AMT cap gain difference from regular tax in form 6251 (line 16 maybe?). It was a negative number.

Prior to that, I used form 8801 to take any AMT credits due me from prior year ISO exercises, and this would carry the tax credit forward as appropriate. Of course I filled out line 13 of form 6251 for any year that I exercised stock options.

I think if you fill out 6251 and 8801 that should get you carrying forward any excess ATM credit you aren't able to take this year.

Sorry, this is the best I can remember of the details.

Audrey