bussierd[at]hotmail.com (Dirk Bussiere) writes:

- quote -

Did both the exercise and the sale happen in the same tax
year (i.e. either both in 2003 or both in 2004)?

If so, that effectively turned the ISO (with respect to
those shares) into an NQO and there are no AMT issues at
all. You'll simply have recognized wage income equal to the
bargain element (your employer should automatically include
this in box 1 of your W-2) , an adjusted basis equal to the
exercise price plus those recognized wages, and a capital
gain or loss figured by subtracting your adjusted basis from
the sales proceeds.

- quote -

You're saying you got an unrestricted stock grant (i.e.
there was no vesting -- you fully owned and controlled
the stock from the second you got it)? If so, you'll
have wage income equal to the value of the stock on the
day you got it (again, your employer should automatically
include that amount in box 1 of your W-2). If you got the
stock in 2003, that wage income is for 2003. If you got
the stock in 2004 that wage income is for 2004, in both
cases regardless of when you sold. Your basis in the stock
is the recognized wages and your capital gain or loss is
sales proceeds minus that basis. As for when the cap gain
or loss is reported, that depends on when you sold. If you
sold in 2003, the cap gain/loss goes in 2003. If sold in
2004, the cap gain/loss goes in 2004.

- quote -

The stock grant has no AMT effect. The ISO exercise will
have no AMT effect if the exercise and sale took place
in the same tax year.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Earlier this year, I executed and sold a few thousand shares
of ISO options I had using a 'cashless' sale option my
employer provides. That is, when using this option, the
exercise and sale occur virtually simultaneously, and you
receive a check for the difference between the sale price
(the current price of the stock) and the exercise price that
you had been granted.

Additionally, I received a few hundred shares of zero strike
price stock. That is, the stock is given to us for no cost
as an incentive. For this, the system is that my employer
sells the portion needed to cover the taxes on the stock
when you receive it and you are free to do what you want
with the rest. I sold mine.

How should I report this income for my 2003 taxes? I have
been told that it is reported as revenue.

Also, I think I will be launched into AMT this year. Will
either of these allow me to claim an AMT credit for use in
future years?

Thanks in advance.

-Dirk

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