In the current tax year, Ben exercised an incentive stock option (ISO), acquiring stock with a fair market value of
$190,000 for $170,000.As a result, his AMT basis for the stock is $170,000, his regular income tax basis for the stock is $170,000, and his AMT adjustment is $0 ($170,000 - $170,000).

Question

Quizplus · Accepted Answer

When Ben exercises an incentive stock option (ISO) and acquires stock, for AMT purposes, the basis of the stock is the price he paid ($170,000), but the AMT adjustment is the difference between the fair market value of the stock when exercised ($190,000) and the price he paid ($170,000), which is $20,000, not $0. His regular income tax basis for the stock is indeed $170,000, but the AMT adjustment should be $20,000.

In the Current Tax Year, Ben Exercised an Incentive Stock