Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

ANOTHER BAD DAY FOR AMT-ISO VICTIMS

August 30, 2006

The Tax Court rejected pleas for relief from another taxpayer who was socked with alternative minimum tax from exercising incentive stock options. This taxpayer exercised incentive stock options for PMC-Sierra stock in 2000, paying $183,263 for stock valued at $2,910,251. This was non-taxable for regular tax, but resulted in $2,726,988 of AMT taxable income.

As in so many of these cases, the stock value collapsed and the taxpayer had nothing to show for the ISOs but an AMT bill of $786,000 or so.

The taxpayer tried to compromise her liability with the IRS; when they rejected her offer in compromise, she sued in Tax Court, saying the IRS "abused its discretion" in refusing to compromise the liability. Citing the Speltz case, where the court rejected a similar pleading from an Eastern Iowa McCleod employee, the court turned down the claim.

Cite: Wai, T.C, Memo. 2006-179.

THEY SHOULD HAVE SUED ME!

Tax Analysts reports another AMT-ISO case with some strange arguments. The taxpayer sued for a refund in the U.S. District Court for Central California on the grounds that she should have been sued under four different legal arguments for having exercised her stock options, and that therefore she shouldn't have had any income. The district court said that there was no evidence that any of those arguments would have succeeded, but I hope for her sake that the statute of limitations has expired for all of the things she thinks she should have been sued for.

Cite: Hernandez, DC CD-California, Case No. Case No. CV 04-9365.

 • AMT       Bookmark: del.icio.us • Digg • reddit