Can I write off the difference between FMV when selling ISO if less than FMV when exercised in previous years?
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New Member

Can I write off the difference between FMV when selling ISO if less than FMV when exercised in previous years?

Using some hypothetical numbers; In 2016 I exercised 100 ISO shares at a strike price of $25. FMV on that day was $100. This led to an additional AMT income of $7,500, which I paid taxes on. In 2017 I sold 50 shares at $90 a share and in 2018, I sold the remaining 50 shares at 95$ a share. I used AMT credits from the 2016 AMT to offset taxes owed on those gains in 2017 and 2018.

My question is, are there any capital losses or others that I can write off since I paid AMT on a FMV that was greater than the FMV on the day I sold the shares?
5 Replies
Level 7

Can I write off the difference between FMV when selling ISO if less than FMV when exercised in previous years?

Your AMT credit is applicable to your federal tax, not just the capital gains income.  See, e.g.,

https://www.wikihow.com/Claim-AMT-Credit

for a step-by-step.  Note that line 54 now appears on 2018 Schedule 3.


New Member

Can I write off the difference between FMV when selling ISO if less than FMV when exercised in previous years?

Thanks for your response. I am already taking the AMT credit (I have left it to turbo tax decide how much can be used towards normal income tax and my capital gains). I am wondering, is there anything more I can credit or write off since the shares FMV one the date AMT was determined was greater than the FMV when the shares were finally sold.
Level 7

Can I write off the difference between FMV when selling ISO if less than FMV when exercised in previous years?

I can't see why.  The AMT credit rolled back the original gain to $100 back to the $25 cost.  The regular capital gain then taxed the gain to $95.  It's as if you never had to pay the AMT except for the money it might have earned had you had the AMT payment in your pocket until you sold.
New Member

Can I write off the difference between FMV when selling ISO if less than FMV when exercised in previous years?

My thought process is: I paid AMT tax on a $75 per share "gain" when exercising the shares. When I finally sold the shares, capital gains tax was paid on a gain of $70 per share. The AMT credits are being used to pay off the capital gains tax. Now, since the actual gain (and resulting tax) was less than the "gain" at exercise (and the AMT I paid), is there any way to recoup the excess credit left behind, beyond just using a little bit each year towards normal income tax?

I ask because the difference in FMV from exercise to actual sale is much greater than the $5/share in my hypothetical example above. This means I have a lot of excess AMT credit laying around that I would love to use up quicker than the limited amount each year towards my normal income taxes.
Level 7

Can I write off the difference between FMV when selling ISO if less than FMV when exercised in previous years?

Can't think of anything specific, but I suppose you could work on reducing your 2019 AMT by, say, selling off municipal bonds that tend to report private activity amounts.  That would be better in my opinion that trying to raise your federal tax by, say, investing in collectibles or accumulating a pile of short term capital gains.
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