- 16 -
of what income the taxpayer recognizes for AMTI purposes. See
sec. 56(b)(3); Speltz v. Commissioner, 124 T.C. 165, 178 (2005),
affd. 454 F.3d 782 (8th Cir. 2006); sec. 1.83-7(a), Income Tax
Regs.
Section 83(a) generally requires a taxpayer to recognize as
AMTI the spread between the stock’s FMV and the exercise price
when a taxpayer is transferred a share of stock pursuant to the
exercise of an ISO and its FMV exceeds the exercise price on the
date of exercise. Secs. 55(b)(2), 56(b)(3), 83(a); Tanner v.
Commissioner, 117 T.C. 237, 242 (2001), affd. 65 Fed. Appx. 508
(5th Cir. 2003). A taxpayer generally will not recognize income
for AMT purposes under section 83(a) if the stock included in an
ISO is subject to a substantial risk of forfeiture on the date of
exercise. Sec. 83(a).
Pursuant to section 83(a), when petitioner exercised option
No. 117, he would recognize as AMTI $1,766,340,11 the excess of
the vested stock’s FMV over its exercise price on the date of
11 The FMV of the vested shares on the date of exercise was
$1,767,966 (17,333 (vested shares on date of exercise) x $102
(FMV per share of stock) = $1,767,966 (total FMV)).
The vested shares exercise price on the date of exercise was
$1,626 (17,333 (vested shares on date of exercise) x $0.0938
(exercise price per share) = $1,626 (total exercise price of
vested shares)).
The AMTI recognized from exercising the vested shares was
$1,766,340 ($1,767,966 (total FMV of the vested shares) - $1,626
total exercise price of the vested shares) = $1,766,340)).
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