Subject: ISO AMT Comment: Submitted by the Individual Faith Henricksen 118 Daisy Hill Lebanon, NH 03766 March 17, 2005 I am writing you because of the unfairness of the AMT. We exercised incentive stock options, paid a penalty because we could not pay the tax right away, and when we did pay it, we wound up with a $75,000+ credit (not including the penalty of course). The penalty is particularly unfair. We had to sell all our investments, cash in all our savings, and sell the stock in question at a very low price and pay a penalty JUST TO GET A CREDIT THAT WILL BE PAID BACK TO US. WE PAID A PENALTY ON OUR OWN CREDIT. This credit is being slowly (ever so slowly) doled back to us (interest free) year after year. My rough estimate is that it will take over 7 years to “get “ our money back. The AMT did not only affect our decisions in the years of exercising the stock options, but every year following. We decided to not have a child since our savings was wiped out (we are considering it now, but I am over 40 now). Currently, we are better off selling stocks to use up the credit than holding the stock if it’s a good one. (It is my belief that it would be best to use up the credit as soon as possible.) I used to file my taxes myself; now I always have an accountant review them (even though I am a tax preparer). I used to try to predict the results on our taxes of a particular action. I like to think that after 5 years of preparing hundreds of returns, I have learned something about the tax code and the AMT. But, whenever I tried to understand what the AMT was doing, I would go into the office and “run the numbers.” I was usually incorrect in my predictions of AMT behavior. I no longer attempt to predict it! (Oddly, my accountant calls me an AMT expert. I must counter with, “No one can possibly be an AMT expert.”) I do regret not rolling over our IRAs into Roth IRAs during the stock market crash. We just could NOT have paid the tax, and when I “ran the numbers” such a rollover would not have used up any AMT credit. One thing I hope you set as a goal is paying back the credit as soon as possible. It would also be truly wonderful if we got the interest and penalty back. I do believe the AMT contributed negatively to the stock market crash of recent times. If a person sells the stock within a year of exercise, they pay taxes on the value of the stock at the sale and not at exercise. As the stocks crashed, people who bought high wanted to avoid the high tax and sold to lock in a low tax thus driving the price even lower. The crash was deeper than it should have been. There is more I have said over the years, and more I could say now, but I am sick and tired of dealing with this issue. Forgive my bluntness. Sincerely, Faith Henricksen |