Exercise of an iso - form 3921

[taxgirl]

Have a client that received this form. As far as I can tell, there is nothing to report until the stock is sold. Am I correct on this?

[ttbtaxes]

the difference between the exercise price and fair market value, times the number of shares, is an addback for AMT purposes.

[kamckinley]

Have a client that received this form. As far as I can tell, there is nothing to report until the stock is sold. Am I correct on this?

You are correct. The Form 3921 is just information to help determine the gain/loss when the stock is eventually sold. However, you need to calculate the AMT adjustment; the 3921 will be helpful for that.

[taxgirl]

This is new to me... I calculate the adjustment when the stock is sold, or now?

[Roland Slugg]

Nothing is taxable for regular income tax purposes until the stock is sold. For AMT purposes, however, part of the stock's value is included for AMT purposes in the year of exercise. See ttbtaxes' reply above and the instructions for F-6251.

[TomJ]

In your tax software, there should be somewhere for you to enter the exercise of an Incentive Stock Option. You'll use the info on 3921 for that. That should generate the AMT preference for you for this year. Not sure what tax software you use, but in Proseries, go to the Forms search and type "exercise". The Exercise SO worksheet will pop up.

Note, in the year the stock is eventually sold, you'll need to sell it in your software from an employer stock worksheet. Make sure to re-enter the ISO data from the 3921 in the acquisition information section. The software should assume it was reported correctly as an AMT preference in the year of exercise and so you'll have one (higher) basis for AMT and one (lower) basis for regular tax. All else being equal, this will generate a partial AMT Tax Credit and carryover any remaining AMT Tax Credit to the following year.

[taxgirl]

Thank you!! I do use proseries and will figure this out this weekend

[nwtaxlady]

Form 3921 vs. form 3922?

My client received a form 3922. What is the difference? Do I do the same calculation for the AMT adjustment?

Thanks

[Gary2]

The 3921 is for ISOs (Incentive Stock Options), and do impact AMT. The 3922 is for ESPPs, and won't impact AMT. Both forms are useful for calculating basis when the stock is sold.

If you're wondering about the difference in the underlying options, ISOs are usually specific grants to individual employees as a performance reward, while ESPPs are generally open to all full-time employees after meeting a minimum employment time requirement.

[taxgirl]

After filling out the worksheet, and form 6251 reflecting no alt min tax, that's it until the stock sells, correct?

[Gary2]

After filling out the worksheet, and form 6251 reflecting no alt min tax, that's it until the stock sells, correct?

Correct. But make sure the 6251 prints out for their personal copy, and scribble on it "No ISO impact" or some such thing. Or do that someplace else, so you don't go crazy wondering if there's an AMT credit to claim in some future year when they sell the stock.