Stock Options and AMT

[Unregistered]

Client checked the yes box on organizer for "Were you granted, or did you exercise, any employer stock options during 2005?"

I called and he said the employer gives him restricted stock that takes 4 years to vest. Each year as 25% is vested, the value of the stock is taxed as wages on the W-2. If he leaves the job before the vesting period ends, he gets nothing for the stock that has not yet been vested.

I don't believe this is a stock option subject to AMT. It sounds more like a non-qualified deferred compensation plan paid in company stock as the employee becomes vested in the plan. The full value of the stock is taxed as he becomes vested.

Any opinions?

[Unregistered]

I think I answered my own question. Looking further, there is $5,308 included in box 12 of the W-2, with a code V.

Code V instructions say: "V—Income from exercise of nonstatutory stock option(s) (included in boxes 1, 3 (up to social security wage base), and 5)."

If the exercise of a nonstatutory stock option is taxed for regular tax purposes, then there would be no AMT adjustment to worry about.