What happens to AMT when I file 83(b)?

June 12, 2000

Subject:   Exercising Unvested ISO’s & Filing 83(b)
Date:   Thu, 1 Jun 2000
From:   Gaye

I understand that exercising unvested ISO’s and filing a Sec 83(b) results in recognition of taxable income on the date of option exercise for purposes of AMT. So, on the date of exercise, you file an 83(b) and pay AMT on the gain (exercise price is $1. FMV on date of exercise is $3, you pay AMT on $2). Now, when the share vests and the FMV is $XX, what happens for AMT?



Hello Gaye,

When you file a Section 83(b) election when making an early exercise of an ISO, it “closes” the transaction for AMT reporting as of the date of exercise. That means there will be no consequence when the share vests. Therefore, the answer to your question is, “nothing!”

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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