Posted: Jul 18, 2005 By: Karen Savage

Subject: I basically pre-paid 123% in ISO-AMT taxes on shares for which I received NO economic benefit!

Comment: Dear Chairman Mack & Vice-Chairman Breaux, please assist us in making things right.

In the year 2002 for the year 2001 I paid $23,721 AMT to the Federal Government and a further $2,730 AMT to the state of California.

I paid this tax based on my exercising 10,750 shares of ISO stock from my then employer: SeeBeyond (SBYN). On the dates of exercise the stock's value was on average $10.00 per share. By tax time the following year these shares were valued at about $2.00 a share. I basically pre-paid 123% in taxes of the shares then current value (for which no money actually changed hands). Of course, I did not have $25,000+ lying around so I send what cash I had (about $6000) and then scrabbled to borrow the rest. Because it took me a couple of months to come up with the money, the IRS ‘added insult to injury’ by adding interest and penalties. I tried to reason with them explaining that this was a tax on income I had not actually received; but they did not budge and I ended up paying the penalty and interest as well.

I have held onto these shares in the hopes that their value might some day rebound (Long-term ownership in our company as Congress had intended) so I could recoup some of my taxes; but earlier this month it was announced that Sun Micro systems would be buying up the company (SBYN) at a price of 4.25 per share. Therefore, that is the most I can expect to get for the shares.

This has been very a very stressful (not to mention costly) experience for me; but I am one of the ‘lucky’ ones. Many of my co-workers exercised their options when the shares were valued at $30+; a number of these people were financially wiped out!

Sincerely,

Karen Savage
Upland CA – 26th Congressional District