Posted: May 05, 2005 By: Vivian Kramp

Subject: ISO AMT

Comment: Vivian Kramp, individual
San Jose, CA
vivk@mindspring.com

3/18/05

I exercised 4600 shares of ISO stock at $61.0625 per share on 9/14/2000. If I had sold at that point, the total value of the stock would have been $212,827.90. But the stock tanked to $17 a share, for a value of $78,200.

On my 2000 tax return I had to pay $78,864 in Alternative Minimum tax, which is more than the stock was worth. My adjusted gross income for that year was $79,596. Virtually all of my income for the entire year went to pay the AMT. As a divorced woman I am receiving alimony that diminishes in amount every year. In 3 more years, that will drop to zero.

I was counting on the stock options to tide me over until I can work again. With a special needs child, it is difficult to return to work at this point. I can ill afford to pay almost $80K in AMT when the stock value dropped so much. The AMT is affecting many middle class people like myself, many in more dire straits than I. To pay my 2000 income tax bill I had to spend all of the profit from the sale of my house after the divorce. I have heard stories of people losing their homes and savings because of this tax.

To tax someone on paper profits is grossly unfair. If I had actually sold the stock options, then the tax would be fair. The AMT was supposed to target wealthy taxpayers, but the unintended consequence has been to hit middle and lower income wage earners. We are being destroyed by huge, unfair tax burdens. Please reform the AMT to eliminate this problem.