If I exercise and hold ISO options and my bargain element is $5000 and I earn ~$100,000, would I be a likely candidate for alternative minimum taxes?

ANSWER

Expert William Richmond's Answer:

I assume you mean that you would exercise the ISOs and hold the stock, and that your "gain" on the exercise is $95,000. This $95,000, while not taxable for regular tax, is a tax preference for AMT and would thus increase your taxable income for AMT purposes. Whether this preference would result in an AMT tax liability depends upon several factors, particularly your regular taxable income. It is likely, however, that you would generate an AMT tax liability but your basis in the stock would be higher for AMT purposes so you may have a future benefit.

William Richmond, CPA

Tennessee

35 yrs experience

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