Adjust Capital Gains to account for AMT already paid

Forum|Forum|3 years ago
January 24, 2023
2 replies
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In 2020 I exercised ISO stock options. I paid roughly $80,000 dollars in taxes in 2020 due to exercising these option, but I didn’t sell any of them.

Last year, in 2022 I sold 2,350 of them for an average price of $25.40.

The taxes I paid in 2020 was based on a fair market value of $35.00. This means that i paid taxes on stock worth $35.00 but when I sold it it was worth $25.40. $25.40 - $35.00 = $9.60 per share. At 2,350 shares that a different of $22,557.25.

Fidelity has given be a 1099-B form which is what i have entered into turbo tax. However that assumes that i purchased the price at $2.38 which is what was on my 3921 form from 2020. The 3921 form values were

Box1 (Date option granted)=7/31/2018.

Box2 (date option exercised) = 9/11/2020.

Box3 exercise price per share)= $2.38.

Box4 (fair market value per share on exercise date) = $35.00.

Box5 (no. of shares transferred) = 10,180

————

I need to know how to deduct this amount so that I am not paying taxes on stock that was sold for less than I exercised at.

TurboTax Deluxe Online

Best answer by DianeW777

You must manually adjust the cost basis for the amount you paid ($2.38 + amount included in taxable income on the day of exercise =$35 total per share based on your comments above).

You are allowed the full cost basis at the time of sale which is all of your after tax money used to purchase them at exercise.

Go to the sale of this stock and make the cost basis adjustments for these shares.

Search (upper right) > Type 1099b > Click the Jump to .... link
Edit beside the appropriate sales

DianeW777Answer

You must manually adjust the cost basis for the amount you paid ($2.38 + amount included in taxable income on the day of exercise =$35 total per share based on your comments above).

You are allowed the full cost basis at the time of sale which is all of your after tax money used to purchase them at exercise.

Go to the sale of this stock and make the cost basis adjustments for these shares.

Search (upper right) > Type 1099b > Click the Jump to .... link
Edit beside the appropriate sales

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jmcicc111Author

Thanks this is what I needed. To give a more specific description for anyone else, I needed to check "enter them individually" after confirming it was an ISO sale. Then after checking the box that the cost basis is incorrect, I needed to check the field that said "I can't find it and need help" in regards to a supplemental form to the 1099-B. It seems this is because the broker I sold the stock with is not affiliated with the company that issues the original options... So they don't have any information other than the cost basis from when I transferred the options over.

This all led me to various prompts that allowed me to enter my 3921 form details from the ISO exercise. It appears this is doing what I need it to do.

Thanks again. @DianeW777

JQ21

I have the same issue, wonder if you have figured out how to do it. My sale of ISO stocks held more than one year should lead to about -$40k AMT income adjustment. Changing cost basis of the sale only messes up with the long-term capital gain tax (schedule D), it does nothing to my AMT income. Tried to adjust AMT income under AMT review, but somehow my "Disposition of Property" was limited to about $16k, far less than the $40k adjustment I entered. Very frustrated. Any help will be appreciated. Thanks.

DavidD66

If you exercised Incentive Stock Options and held the stock (did not sell) past year end in the year of exercise, any tax you paid on that transaction would have been AMT. Your AMT basis in the stock is $35/share, but your regular tax basis is $2.38. That would have given you an AMT tax credit. Now that you have sold the stock, you must calculate your regular tax using a $2.38/share basis, and then calculate your AMT and see if you can use some or all of your AMT credit. You should have filed Form 6251 in 2021 in order to roll your AMT credit forward. You cannot just adjust your regular tax basis to that of your AMT basis. In all likelyhood you probably won't be able to use all (if any) of your AMT credit, unless you are otherwise in a AMT tax situation.

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JQ21

Thanks! @DavidD66 The problem I see with Turbotax is that there is no place to enter the AMT adjustment for each ISO stock sale individually. What people often referring to is to adjust cost basis for regular tax. The only place I can enter AMT adjustment is under "Other Tax Situation / Alternative Minimum Tax". There one enters the total AMT adjustment combining all sales, making it hard to track and understand. Could it that I have missed something, but I have been playing around for some time now and so far could not find any.