Subject: ISO-AMT Comment: Michael Jennings Individual with ReformAMT.org 3/17/05 New Albany, IN mej@kainx.org I began to work for VA Linux Systems in 1999. Their IPO in December 1999 was the largest in the history of the US stock market, and the plummet the stock price made afterward is probably equally well-known. But around IPO time, and for over a year afterward, the market outlook was still very positive. Being the naive 23-year-old I was at the time, I took the advice of others on how to handle stock options. Toward the end of December 2000, I exercised a large amount of ISO's(6250 to be exact) at my strike price of $1.00 per option. The market value that particular day happened to be $32.50/share, so according to AMT, I made over $200,000 that day and owed around $80,000 in taxes. I sold a relatively small amount of shares, just enough to make $18,000, which was gifted to my parents during December and January. As my accountant and stockbroker advised, I held onto the remaining shares to sell at a later date. Unfortunately, by the time I sold the remaining shares from That exercise, the stock value and my strike price were Frighteningly similar. I then had (and still have) no way to pay off such an enormous tax debt. Thus far I have paid around $40,000 toward that liability, yet I still owe over $69,000. My annual income for the past 2 tax years COMBINED doesn't even total $69,000!Not counting AMT, my tax liability for the 2000 tax year was approximately $19,000, almost exactly what I paid in withholdings that year. With AMT, my original liability (minus withholdings) was $59,571. Thanks to interest and penalties, the amount I currently owe is about $10,000 more. The original premise behind AMT was to keep captains of industry from postponing tax liability through the use of stock options. The fact that so many honest, hardworking taxpayers like myself who have always done their best to pay their taxes in full and on time are now owing taxes greater than their annual incomes should be a clear indicator that the current system is unfair and no longer working as its creators hoped. I am forced to pay enormous amounts of taxes on money I never actually made! I acknowledge that stocks are assets and that tax is owed on any profit made from them. But no real profit is made from the exercise of stock options; in fact, exercising stock options COSTS money! And even with the AMT tax credit, the interest and penalties I accrue per year far exceed the annual credit. This means that the amount I owe is growing faster than the credit I get in return, so I will NEVER be able to pay off this debt or recoup this credit! This is clearly an unintentional, but VERY REAL, consequence of the AMT laws as they currently exist. These laws have destroyed my formerly-excellent credit rating and forced me to amass a debt of taxes and credit which now well exceeds $100,000. My annual income for tax years 2002 and 2003 were about $18,000 and $27,000 respectively. Obviously, this is a burden I can never overcome without help. My only hope of having a financial future, buying a house, or succeeding in life is a massive overhaul of the AMT laws and a refund of the taxes I was unfairly required to pay. Thank you for your time and attention to my plight. Michael Jennings New Albany, IN mej@kainx.org |