Exercised and partly sold ISO at the same year (held remaining). Whether/how should I report the exercise for the purpose of AMT?

[ztgeng]

tl;dr I exercised 560 shares of ISO and sold 363 shares of them at the same year. How should I report my exercise for the purpose of AMT?

I exercised two ISO at 2022, one with 300 shares at Apr 6th, another with 260 shares at Jun 29th. The market prices were greater than the exercise price.

At the same dates, I sold a portion of them: 97 shares at Apr 6th, and 266 shares at Jun 29th, with the market prices. I held the remaining 197 shares to the end of year.

When I work on the tax return:

1. First, I report the short term sales of those (97 + 266) shares, and will be taxed for the capital gains with cost basis of the exercise price.
2. Then I need to report the "ISO Exercise and Hold" to calculate the AMT.

Question:

Do I need to report ALL the shares I exercised (for both exercises), or just the unsold shares of them?

• If I report all the 300 + 260 shares, I will be taxed for the AMT, which seems a double taxation since I already sold most of them at the same year and paid the capital gains tax.
• If I should report the unsold part, how should I do that with TurboTax?
• Or, should I report all the exercised shares, but adjust the cost basis for the sales?

[GeorgeM777 · Accepted solution]

No, for the AMT, just report the shares that you held over year-end.   You are correct in that the shares you sold you will pay the relevant capital gains tax.  To report your ISOs, both the shares you held over year-end and the shares you sold, enter these transactions as two separate transactions.  For example, in TurboTax online, after you select Wages & Income, left margin, scroll down the screen to the section, ISO Exercise and Hold, and beginning with the screen, Did you buy and hold ISOs in 2022, enter your information as prompted.  The information question on that screen, What if I bought and sold ISOs in the same year? will advise you to report your sales of the ISOs in the section Investments and Savings.  Investments and Savings is on the same screen as ISO Exercise and Hold.

If you are using TurboTax CD/download, enter the information about your ISO sales as follows:

1. Select Personal, then Personal Income.
2. Scroll down the screen to Investment Income.
3. Select Stocks, Mutual Funds, Bonds, Other...
4. Enter your information as prompted.   Moreover, you will see a screen asking about how you acquired the shares in question.  You can select the ISO option.
5. At the screen, Did You Buy or Sell Shares? select the option that you sold your shares and continue through the application.

In TurboTax CD/download, in the Investment Income category, there is also an option to select ISO Exercise and Hold.  Select that option for the ISO shares you held over year-end and enter your information when prompted.