What forms do I have to fill out to report the exercise of my Incentive Stock Options properly?

May 10, 1999

Subject:   question about ISO
Date:   Sun, 21 Mar 1999
From:   Michele

In 1998 I exercised my stock options, on the date of grant, for the fair market value. I also filed an election under 83(b) at the same time. Since there was no “spread,” I have no gain to report. Do I still have to fill out a form 6251? I have never had to pay AMT before. I was also told that I should include a copy of the 83(b) with my return for 1998. Is this correct?




Date:   Mon, 10 May 1999

Hi Michele,

Sorry I didn’t write back to you sooner. In the heat of tax season, I misplaced your email and I just found it.

You were advised correctly to include a copy of the Section 83(b) election with your income tax return. You are also required to give a copy of the election to your employer. (Treasury Regulations § 1.83-2(c) and (d).)

You are only required to file Form 6251 when the tentative minimum tax before AMT foreign tax credit exceeds your regular tax, so the form probably isn’t required in your situation. (See instructions for Form 6251.) I think it’s a good idea to include the form with your tax return anyway as a reminder of what your reporting position was in the year of exercise (no preference.)

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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