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The Internal Revenue Code imposes upon taxpayers an AMT in
addition to all other taxes imposed by subtitle A. See sec.
55(a). The AMT is imposed upon the taxpayer’s AMTI, which is an
income base broader than the base of taxable income applicable
for Federal income taxes in general. Allen v. Commissioner, 118
T.C. 1, 5 (2002); see also H. Conf. Rept. 99-841 (Vol. II), at
II-249 (1986), 1986-3 C.B. (Vol. 4) 1, 249, 264. AMTI is defined
as the taxable income of a taxpayer for the taxable year,
determined with adjustments provided in sections 56 and 58, and
increased by the amount of items of tax preference described in
section 57. Sec. 55(b)(2).
As applicable to the instant case, for purposes of computing
a taxpayer’s AMTI, section 56(b)(3) provides that section 421
shall not apply to the transfer of stock acquired pursuant to the
exercise of an ISO, as defined by section 422. Therefore, under
the AMT rules, shares of stock acquired pursuant to the exercise
of an ISO are treated as shares of stock acquired pursuant to a
nonqualified stock option (NSO) under section 83. See sec.
56(b)(3); sec. 1.83-7(a), Income Tax Regs.; see also Speltz v.
Commissioner, 124 T.C. 165, 178-179 (2005).
Under section 83, a taxpayer generally must recognize income
when he exercises an NSO to the extent that the fair market value
of the shares of stock transferred to him exceeds the price he
pays at the time he exercises the option, so long as the
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