Subject: Home lost to AMT Pre-payment on Stock Options Comment: Dear Honorable Chairman Mack and Vice Chairman Breaux please accept my submission to the Panel for review. The submission I provide you with today was my Testimony given to the Ways & Means Oversight Sub-Committee last Summer. Craig Chesser Statement To House Ways and Means Committee, Subcommittee on Oversight Washington, D.C. June 2004 I incurred over $125,000 of AMT when I exercised stock options. It was my first ever stock option exercise and even though I was in a finance profession, I was unfamiliar with the details of AMT and how it worked. I exercised my options in December 1999 with the intent of selling the stock after my company announced earnings in February. I exercised early because (a) my company's captive broker did not reliably execute trades in a timely manner; (b) I had time to do the exercise and account setup paperwork and I knew I would have very little time after the end of the year; and (c) even as a finance professional, I never suspected AMT would have such a hugely devastating, unfair effect - taxing me on gains I never actually realized. I didn’t realize that by exercising in one calendar year and holding the stock for sale just a short time later, but in a different calendar year, I was automatically subjecting myslf to AMT. By the time I should have been able to sell, my company prohibited me from selling, and I was stuck with the stock, which was rapidly diminishing in value. I had exercised the options on margin, and to pay off the margin debt I had to sell my house. AMT turned what could have been just a lost opportunity to make money on stock options into a devastating, life-changing event that gutted my savings and cost me my home. All this to pay tax on phantom gains that had evaporated by the time I filed my income tax return the next year. This is truly the most twisted, broken, and unjust aspect of the tax code. Craig Chesser New York, NY |