Adjust AMT for the ISO sold in less than a year but next tax year

[cocoa24]

In year 2021, exercised 5000 ISO share like below and paid AMT tax for the tax year.

Transaction date: 12-04-2021

Number of shares: 5,000

Exercise price: $2.55

FMV: $32.15

In 2022 November, I sold 5,000 shares at $12.1 and got a 1099-B for the transaction. I put the actual gain in 1099-B into the Turbotax for this year's tax filing. 

Now, I tried to adjust the AMT tax as much as the difference between the FMV and actual sale price, but couldn't find how to do this in Turbotax.   The Turbotax has all my form-3921s, and I chekced the menu related to these forms. However, there is no interview or input menu for the ISO sold.

Can anybody help me? Thanks!

[AmyC]

You should have reported AMT on your 2021 tax return. The FMV minus the option price should have been reported on Form 6251 last year.

For 2022, when you go through the data input screens and select that is was from an employer stock plan, the questions should lead you through to input all necessary information for the program to handle the AMT this year.

Follow these steps for entry:

• Enter these under Investment Income > Stocks, Mutual Funds, Bonds, Other > Start/Update
  • Be sure to select I'll enter myself so that you can change the purchase price to add the FMV difference taxed when you exercised this stock in a prior year.
• Enter one sale at a time or choose summary > Continue to enter the details for the ISOs sales
  • Be sure to select Long or Short term noncovered as the Sale Category

I wonder about the holding period. Since I don't know the grant date, I am uncertain where you are. Based on a sale less than a year after exercise, it could be that you did not meet the holding period requirements which changes how the ISO is treated on your return.

For more on AMT based on where you land in the above paragraph, see AMT info here. Here's a TurboTax article about AMT.

[cocoa24]

@AmyC  Thank you for the reply! 

The option is granted in 2018.  So, it satisfies the "holding period requirement".

As you instructed, I visited "Investments and savings"-"Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)"-"Stock, Bond, Mutual Funds".  TT asked to input 1099-B. (By the way, I'm using TT Primer Web)

In the input screen, "Short-term basis reported to IRS (Covered)" selected and filled other inputs with the information below. (The 1099B says the following information is reported to IRS)

Applicable checkbox on Form 8949: A
Box 1a: 5,000 of 5,000 Shares sold
Box 1b (date acquired): 04 Dec 2021
Box 1c(date sold): 30 Nov 2022
Box 1d (proceeds): 60,450.63
Box 1e(Cost basis): 12,750.00
Box 4(fedral tax withheld): 0
Box 12(basis reported to IRS): checked
Box 16(state tax withheld): 0

Now, in the next screen it asks cost basis adjustment like below.

Do I have to put the adjusted cost basis at here? If so, TT will automatically adjust AMT tax (form 6251) I paid last year? In my understanding adjusted cost basis is  (FMV-exercise price) x number of share. Am I correct?

I could also find that my case is #3 in https://turbotax.intuit.com/tax-tips/investments-and-taxes/incentive-stock-options/L4azWgfwy.  The article doen't mention anything about cost basis adjustment and 1099B. I'm really got confused.

Thanks again!

[AmyC · Accepted solution]

1. You want to adjust the basis! When you exercised the stock, the spread between FMV and exercise was included in your income for calculating AMT. However, your exercise price times the number of shares is going to be your cost basis since it is a qualifying disposition. Which incredibly, matches your box 1e.

2.  You do normally need to make adjustments to both the stock basis and the AMT basis for 2022. The AMT is not a carryforward. It looks like your basis is correct for the 1099-B.

3. No, if you look at the article you mention, it is correct for how to handle your situation. Your gain will be the FMV - exercise price. Enter the exercise price as your basis times the number of shares.

4. The article is covering a lot of information in a short space. The gain is the part that relates to your taxes for the cost adjustment.

In conclusion, it looks like your 1099-B received the correct information from your company and an adjustment is not necessary for the 1099-B.

You will need to adjust for the AMT on 6251. Select that you need to make an AMT adjustment to my investment income or expenses. Use last year's return and follow the instructions.

Reference:

• Missing AMT credit? - explains your AMT issue and how to correct