In 2005,Collies exercised an incentive stock option (ISO),acquiring 150 shares of stock at an option price of $75 per share (fair market value at the date of exercise was $130 per share).In 2014,the rights in the stock become freely transferable (fair market value is still $130 per share). Which of the following statements is incorrect?
A)Collis has no AMT adjustment from the ISO in 2011.
B)Collis has no taxable income from the ISO in 2011.
C)Collis has an AMT basis of $19,500 in the stock.
D)Collis has an income tax basis of $11,250 in the stock.
E)All of these are correct.

Question

Quizplus · Accepted Answer

Statements a. ,b. ,c. ,and d.are all correct.The transaction has no effect on taxable income or alternative minimum taxable income in 2011 (statements a.and b. ).Note that the AMT adjustment for the spread is in 2014.Collis' basis is equal to FMV at the date of exercise,and his regular income tax basis is equal to his cost (statements c.and d. ).In 2014,Dan has a positive $8,250 ($19,500 - $11,250)adjustment for AMT purposes.

In 2005,Collies Exercised an Incentive Stock Option (ISO),acquiring 150 Shares