Do I get the 15% long-term capital gains tax on my incentive stock options?

April 22, 2005

Subject:   AMT question
Date:   Sun, 20 Mar 2005
From:   Robert

Hello Mike,

I exercised some ISOs in 1997 and 1998 and held the shares. The ISOs were granted at least 5 years before I exercised them. I didn’t know anything about AMT at the time. Now I’m thinking about selling the shares. I thought that if I held the shares that long, I would just have to pay the 15% long-term capital gains tax. Observations?

Thanks, Robert


Date:   Fri, 08 Apr 2005

Hello Robert,

You have met the holding period requirements for regular tax purposes. If the shares were vested when you exercised the options, you should also meet the holding period requirements for AMT. A question could be whether you are entitled to a basis adjustment for the shares for AMT reporting. If you didn’t report any AMT adjustment when you exercised the ISOs, probably not. So, you should be entitled to the 15% capital gains rate for the sale.

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options – Executive Tax and Financial Planning Strategies.

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