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that certain deferral preferences (such as accelerated
depreciation) cannot be treated simply as add-ons if
total income is to be computed properly over time. For
such preferences, the minimum tax deduction may in some
instances exceed the regular tax deduction (e.g. in the
later years of an asset’s life), thus ensuring that
basis will be fully recovered under both the regular
and the minimum tax systems. * * * [Emphasis added; fn.
ref. omitted.]
Petitioners’ reliance is misplaced. Basis recovery through
depreciation deductions for property used in a trade or business
or for production of income is not analogous to the recovery of
basis for stock, a nondepreciable capital asset. Basis of stock
may be recovered under both the regular and the AMT systems, but
when that stock is sold at a loss, respect must be given to the
limitations on capital losses that are provided in sections 1211,
1212, and 172(d)(2). These provisions are equally applicable to
the AMT as well as the regular tax system. Montgomery v.
Commissioner, supra; Merlo v. Commissioner, supra; Spitz v.
Commissioner, T.C. Memo. 2006-168.
We therefore hold that the difference between the adjusted
AMT basis and the regular tax basis of stock received by ISO is
not a tax adjustment taken into account in the calculation of an
ATNOL in the year the stock is sold. Furthermore, the sale of
petitioners’ Veritas stock received through the exercise of ISOs
is a sale of a capital asset and thus does not create an ATNOL
due to the restrictions of section 172(d). Merlo v.
Commissioner, supra.
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