What are the AMT consequences of early exercise?
July 13, 2005
Date: Thu, 09 Jun 2005
From: Chuck
Hello:
If I take advantage of an early exercise of an ISO, what are the AMT consequences? Do I report the AMT adjustments as the options vest?
Thanks
Answer
Date: Wed, 06 Jul 2005
Hello Chuck,
Yes, unless you make a Section 83(b) election for AMT reporting purposes. When you make the Section 83(b) election, the stock is treated as vested for AMT reporting on the date of exercise. Be very careful when you sell the stock. The ordinary income for a disqualifying disposition for regular tax reporting is determined based on the excess of the fair market value over the option price on the later of the vesting date or the date of exercise.
Good luck!
Mike Gray