Instructions For Form 6251 - Alternative Minimum Tax - Individuals

section 613(a) and the limit based on

Line 13—Exercise of Incentive

in a prior year by exercising an incentive

taxable income, with certain adjustments,

stock option; and

Stock Options

under section 613A(d)(1). Also, your

4. Capital gain or loss (including any

For the regular tax, no income is

depletion deduction for mines, wells, and

carryover that is different for the AMT)

recognized when an incentive stock

other natural deposits under section 611

reported on Schedule D (Form 1040),

option (ISO), as defined in section 422(b),

is limited to the property’s adjusted basis

Capital Gains and Losses.

is exercised. However, this rule does not

at the end of the year, as refigured for the

apply for the AMT. Instead, you generally

First figure any ordinary income

AMT, unless you are an independent

must include on line 13 the excess, if any,

adjustment related to (3) above. Then,

producer or royalty owner claiming

of:

refigure Form 4684, Form 4797, and

percentage depletion for oil and gas wells

Schedule D for the AMT, if applicable, by

1. The fair market value of the stock

under section 613A(c). Figure this limit

taking into account any adjustments you

acquired through exercise of the option

separately for each property. When

made this year or in previous years that

(determined without regard to any lapse

refiguring the property’s adjusted basis,

affect your basis or otherwise result in a

restriction) when your rights in the

take into account any AMT adjustments

acquired stock first become transferable

different amount for the AMT.

you made this year or in previous years

or when these rights are no longer subject

If you have a capital loss after

that affect basis (other than current year

to a substantial risk of forfeiture, over

refiguring Schedule D for the AMT, apply

depletion).

2. The amount you paid for the stock,

the $3,000 capital loss limitation

Enter the difference between the

including any amount you paid for the ISO

separately to the AMT loss. Because the

regular tax and AMT deduction. If the

used to acquire the stock.

amount of your gains and losses may be

AMT deduction is greater, enter the

different for the AMT, the amount of any

Note. Even if your rights in the stock are

difference as a negative amount.

capital loss carryover also may be

not transferable and are subject to a

different for the AMT. See the example on

Line 10—Net Operating Loss

substantial risk of forfeiture, you may

this page. To figure your AMT capital loss

Deduction

elect to include in AMT income the

carryover, fill out an AMT Capital Loss

excess of the stock’s fair market value

If you are filing Form 1040NR, enter your

Carryover Worksheet in the Schedule D

(determined without regard to any lapse

net operating loss deduction from Form

instructions.

restriction) over the exercise price upon

1040NR, line 21, as a positive amount.

For each of the four items listed above,

the transfer to you of the stock acquired

figure the difference between the amount

through exercise of the option. You must

Line 11—Interest From Private

included in taxable income for the regular

make the election by the 30th day after

Activity Bonds

tax and the amount included in income for

the date of the transfer. See Pub. 525,

Enter on line 11 interest you earned on

the AMT. Treat the difference as a

Taxable and Nontaxable Income, for

“specified private activity bonds” reduced

negative amount if (a) both the AMT and

more details.

(but not below zero) by any deduction that

regular tax amounts are zero or more and

If you acquired stock by exercising an

would have been allowable if the interest

the AMT amount is less than the regular

ISO and you disposed of that stock in the

were includible in gross income for the

tax amount or (b) the AMT amount is a

same year, the tax treatment under the

regular tax. Each payer of this type of

loss, and the regular tax amount is a

regular tax and the AMT is the same, and

interest may send you a Form 1099-INT

smaller loss or zero or more.

no adjustment is required.

showing the amount of this interest in box

Enter on line 16 the combined

9. Generally, the term “specified private

Increase your AMT basis in any stock

adjustments for the four items above.

activity bond” means any private activity

acquired through the exercise of an ISO

Example. On March 13, 2005, Victor

bond (as defined in section 141) issued

by the amount of the adjustment. Keep

Ash, whose filing status is single, paid

after August 7, 1986. See section 57(a)(5)

adequate records for both the AMT and

$20,000 to exercise an incentive stock

for exceptions and more details.

regular tax so that you can figure your

option (which was granted to him on

adjustment. See the instructions for

January 2, 2004) to buy 200 shares of

Do not include interest on qualified

line 16.

stock worth $200,000. The $180,000

Gulf Opportunity Zone bonds described in

Line 15—Large Partnerships

difference between his cost and the value

section 1400N(a).

of the stock at the time he exercised the

If you were a partner in an electing large

Exempt-interest dividends paid by a

option is not taxable for the regular tax.

partnership, enter the amount from

regulated investment company are

His regular tax basis in the stock at the

Schedule K-1 (Form 1065-B), box 6. Take

treated as interest income on specified

end of 2005 is $20,000. For the AMT,

into account any amount from box 5 on

private activity bonds to the extent the

however, Ash must include the $180,000

Form 6251, line 18.

dividends are attributable to interest on

as an adjustment on his 2005 Form 6251.

the bonds received by the company,

Line 16—Disposition of

His AMT basis in the stock at the end of

minus an allocable share of the expenses

Property

2005 is $200,000.

paid or incurred by the company in

Your AMT gain or loss from the

On January 20, 2006, Ash sold 100 of

earning the interest. This amount may

disposition of property may be different

the shares for $75,000. Because Ash did

also be reported to you on Form

from your gain or loss for the regular tax.

not hold these shares more than 1 year,

1099-INT in box 9.

This is because the property may have a

that sale is a disqualifying disposition. For

If you are filing Form 8814, Parents’

different adjusted basis for the AMT. Use

the regular tax, Ash has ordinary income

Election To Report Child’s Interest and

this line to report any AMT adjustment

of $65,000 (proceeds minus his $10,000

Dividends, any tax-exempt interest

resulting from refiguring:

basis in the 100 shares). Ash has no

income from line 1b of that form that is a

capital gain or loss for the regular tax

1. Gain or loss from the sale,

preference item must be included on this

resulting from the sale. For the AMT, Ash

exchange, or involuntary conversion of

line.

has no ordinary income, but has a

property reported on Form 4797, Sales of

short-term capital loss of $25,000

Business Property;

Line 12—Qualified Small

(proceeds minus his $100,000 AMT basis

2. Casualty gain or loss to business or

Business Stock

in the 100 shares).

income-producing property reported on

If you claimed the exclusion under section

Form 4684, Casualties and Thefts;

On April 21, 2006, Ash sold the other

1202 for gain on qualified small business

3. Ordinary income from the

100 shares for $60,000. Because he held

stock held more than 5 years, multiply the

disposition of property not already taken

the shares for more than 1 year, the sale

excluded gain (as shown on Schedule D

into account in (1) or (2) above or on any

is not a disqualifying disposition. For the

(Form 1040)) by 7% (.07). Enter the result

other line on Form 6251, such as a

regular tax, Ash has a long-term capital

on line 12 as a positive amount.

disqualifying disposition of stock acquired

gain of $50,000 (proceeds minus his

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Instructions For Form 6251 - Alternative Minimum Tax - Individuals - 2006 Page 3

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