I thought I understood Form 8801, but now I'm not so sure. I have a client who is carrying a 10K AMT credit from an incentive stock option exercised in 2007. He sold the stock in 2008, resulting in an 8K negative AMT adjustment and allowing him to use about 900 of his credit. The carryover to 2009 was the original 10K minus the 900 of credit used, which seems reasonable enough. But in calculating the carryover to 2010, the form reduces the carryover by another 900 or so (nearly, but NOT exactly the same as the amount used in 2008), even though none of the credit is used in 2009. The form calculates this as the 2008 "Net minimum tax on exclusion items," which it determines as the excess of 2008 "Tentative minimum tax on exclusion items" over 2008 regular tax BEFORE application of the AMT credit), since the 2008 AMT is zero.
This seems intuitively wrong. Why should the credit be reduced when there is no benefit from it? And why should 2008 numbers influence the carryover from 2009 to 2010, once the carryover to 2008 has been established? Can someone enlighten me?
This seems intuitively wrong. Why should the credit be reduced when there is no benefit from it? And why should 2008 numbers influence the carryover from 2009 to 2010, once the carryover to 2008 has been established? Can someone enlighten me?