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Date:   Tue, 03 Oct 2006
From:   Bob

I had previously understood that there was no regular or AMT tax consequence from exercising ISOs by surrendering shares of the employer company (a swap).

Please confirm that this understanding was in error.

Bob

Answer

Date:   Thu, 05 Oct 2006

Hello Bob,

Yes. Although there is no regular taxable income from exercising the ISO, you will have the same additional AMT income as if you paid the option price in cash.

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.