Elmer exercises an incentive stock option (ISO) in March for $6,000 (fair market value of the stock on the exercise date is $7,600).If Elmer sells the stock in November of the same tax year for $8,000, he reports a $1,600 AMT adjustment for the year.

Question

Quizplus · Accepted Answer

The AMT adjustment would be $1,600 if Elmer were holding onto the stock, but since he sells the stock in the same tax year as he exercised the option, the entire gain from the exercise price to the sale price ($8,000 - $6,000 = $2,000) is reported as ordinary income, not as an AMT adjustment.

Elmer Exercises an Incentive Stock Option (ISO) in March for $6,000