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No. You do not adjust the cost basis for your regular tax. The cost basis for your regular tax (using your example) is $2. You have a regular tax gain of $55 per share. Your AMT cost basis is $102, and you have an AMT loss of $45 per share. You asked "Is this just covered by AMT credit over time, or do I also need to do an adjustment for capital gains/losses?" The answer is it covered by AMT credit over time.
1. Make an adjustment. Your exercise price is going to be your cost basis since the sale is a qualifying disposition on your long term stock.
2.The adjustment for the cost basis needs to be made to both the stock and the AMT.
Here is more reading to truly explain and help you.
So I need to adjust the cost basis on my AMT AND my regular tax capital gain to be the purchase price?
In that example, the new cost basis will be $102, leaving my capital gains to be -$55/share (or -$4,500 total), and this is reflected on both my AMT and my regular taxes, or only used for my AMT calculation?
No. You do not adjust the cost basis for your regular tax. The cost basis for your regular tax (using your example) is $2. You have a regular tax gain of $55 per share. Your AMT cost basis is $102, and you have an AMT loss of $45 per share. You asked "Is this just covered by AMT credit over time, or do I also need to do an adjustment for capital gains/losses?" The answer is it covered by AMT credit over time.
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