Replies to post #172759 on Biotech Values

[mouton29]

<<If AMT hits, you basically pay ordinary income tax rates on the spread at exercise.>>

I suppose you could construct a fact pattern where that is so, but given that the AMT rate is 28% and the ordinary rate is 39.6% I would have thought that the general outcome, particularly for a very large ISO exercise, would be a 28% tax on the spread. Also, you do get a credit for the excess of AMT over regular tax, usable in the future to the extent regular tax exceeds AMT -- which is likely given that when you sell the stock, your AMT tax basis is the fmv at the time of exercise whle for regular tax purposes, it is the exercise price.

One other difference is that the AMT tax, if due, would be paid with your tax return (or possibly via estimated tax) whereas the exercise by an employee of a nonqualified option is subject to withholding, the employee will have to come up with the cash from some source at the time of exercise.