I am reading in few sites that if the acquired stocks through ISO is not transferable (owner can not sell and there is a lock up period until 180 days after the IPO). Also, it has a restriction that in case of selling the stock has to be sold to the company only and no body else. Therefor, the ISO of a small start up is different of a big company like Microsoft. The stock acquired has no value and it can go down to zero and company never make it to IPO or gets acquired. Therefore, paying AMT on an income that is fictitious and does not have value does not make sense. Here, is an excerpt from Investopedia about this subject of adjustment under line 2i of AMT form.
"However, the adjustment is required only if your rights in the stock are transferable and not subject to a substantial risk of forfeiture in the year the ISO is exercised. And the fair market value of the stock for purposes of the adjustment is determined without regard to any lapse restriction when rights in the stock first become transferable or when the rights are no longer subject to a substantial risk of forfeiture."
