Evan and Carol Marcus - Page 10




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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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