Alternative Minimum Tax Adjusted Gain or Loss
February 2, 1999
My grant price was $19 in Oct. 1996. I exercised in Dec. 1997 at $71 so I paid $52/share as a positive AMT adjustment on Line 10 of Form 6251 in 1997. I sold the shares at $58 in May 1998 so it is a disqualifying disposition because I did not hold the shares for one year from exercise or 2 years from grant.
The gain of $39 ($58 – $19) will be reported as ordinary income on my W-2 because of the disqualifying disposition. What exactly is my “negative adjustment” per share for AMT purposes for Line 9 of Form 6251? Would it be $52 ($71 exercise price – $19 grant price) PLUS $13 AMT loss ($58 selling price – $71 exercise price)= $65/share?
Your AMT basis adjustment at line 9 of Form 6251 will be -$52 per share (fair market value at exercise of $71 – option price of $19.)
Since the starting point for computing the alternative minimum taxable income is regular taxable income, the net loss reported for AMT will be $39 (in regular income) -$52 (AMT basis adjustment) = -$13.
Although you have ordinary income for regular tax reporting, you have a capital loss, which may be subject to the $3,000 per year limit, for AMT reporting.