I exercised an non-statutory stock option in Dec 2016 and the stocks were sold in Jan 2017. Paid AMT for 2016 .How to avoid double taxation when reporting 20171099b?

[celeryqinguo]

As I exercised the NSO in December 2016 and the stocks were sold in January 2017 when the company was bought out, I received the W2 with an income reported on box 12  "v" for 2016 tax , but the 1099b will not be ready until later for 2017 tax year. 

(1) As I have to pay AMT on the NSO in 2016, can I do I enter the tax paid for 2016 as a tax credit for 2017 in turbotax and how? 

(2) Is there a way we could use my capital loss carry-forward from historical stock sales (separately from the NSO) on Schedule D to offset the gain from the NSO either in 2016 or 2017?  

[TomYoung · Accepted solution]

"(1) As I have to pay AMT on the NSO in 2016"

The exercise of non-qualified stock options is not an AMT preference item or an AMT adjustment so you didn't "have to pay AMT on the NSO(s)".  The ONLY way that could have happened is if you entered the exercise in the "ISO Exercise and Hold" interview, in which case you need to go back and amend 2016.

Perhaps you were subject to AMT in 2016 but you can't really "attribute" that to the 2016 NQSO exercise, in the absence of the mistake I mentioned above.

"can I do I enter the tax paid for 2016 as a tax credit for 2017 in turbotax"

You don't for the reason stated above.

"2) Is there a way we could use my capital loss carry-forward from historical stock sales (separately from the NSO) on Schedule D to offset the gain from the NSO either in 2016 or 2017? "

You had no "gain" in 2016 you just had "compensation" from the exercise.  Assuming the 2017 sale was at a gain any capital loss carryforwards from 2016 and before will automatically be applied as an offset.

Tom Young

[celeryqinguo]

Thanks for your comments! Just to clarify that my stock option contract from the employer actually says this is an ISO. But W2 box 12 they use the generic description of "V", which is non-statutory stock option. If this is an ISO, does the principle you just advised for NSO could still be applied? In the other word, would exercising the NSO be subject to AMT in 2016 and could I still use the capital loss carryforward to offset the sales in 2017 tax return? Thanks

[TomYoung]

" Just to clarify that my stock option contract from the employer actually says this is an ISO. But W2 box 12 they use the generic description of 'V'"

A Qualified stock option, which is what a "real" ISO is, is a legal definition and has certain tax attributes.  One of the tax attributes is that you don't recognized compensation at EXERCISE, only on a disqualifying SALE.  So either showing income on the W-2 in 2016 with code V is wrong or the company was using the term ISO incorrectly and it really was a NQSO.  You used the terms "NSO" and "non-statutory" in your post and the V code back that up.

"would exercising the NSO be subject to AMT in 2016"

Only in the very loose sense of being included in your AMT taxable income, just like your salary, interest income, etc.  Certainly not in the sense of being treated DIFFERENTLY in determining your AMT Taxable Income than how it was treated in determining your "regular" Taxable Income.  The exercise of an ISO without a sale of the stock in the same year IS treated differently when determining taxable income under regular taxes and AMT.  And subsequent sales of ISO stock are treated differently when determining regular taxable income and AMT taxable income.  

The sale of the stock at a profit will be reduced by capital loss carryovers.

[celeryqinguo]

Sorry for the confusion. The employer actually confirmed this is a ISO by making a note on box 14 of W2.