This article will help you enter amounts from Form 3921, Exercise of an Incentive Stock Option Under Section 422(b) in the individual module.
For regular tax, no income is recognized when an incentive stock option (ISO), as defined in section 422(b), is exercised. However, amounts are recognized for AMT purposes on Form 6251, Line 14. The amount to be entered on Line 14 must be calculated manually (using the amount from Form 3921) and then entered in Lacerte.
To calculate your adjustment manually:
- Multiply the amount in Form 3921, Box 4 (FMV per share), by the number of shares in Form 3921, Box 5 (number of shares transferred). This is the fair market value of all shares.
- Multiply the value of amounts in Form 3921, Box 3 (exercise price per share) by the shares in Form 3921, Box 5. This is the amount paid for all shares.
- Enter the difference of the FMV and the amount paid on Form 6251, Line 14.
- This information comes from the 6251 Form instructions for Line 14. See the Example for more information.
To enter the amount for Form 6251, Line 14:
- Go to Screen 40, Alternative Minimum Tax (6251).
- Enter the difference of the FMV and the amount paid in Incentive stock options.
Per the Form 6251 filing instructions
Line 14 - Exercise of Incentive Stock Options: For the regular tax, no income is recognized when an incentive stock option (ISO), as defined in section 422(b), is exercised. However, this rule doesn't apply for the AMT. Instead, you generally must include on line 14 the excess, if any, of:
- The fair market value of the stock acquired through exercise of the option when your rights in the acquired stock first become transferable or when these rights are no longer subject to a substantial risk of forfeiture, over
- The amount you paid for the stock, including any amount you paid for the ISO used to acquire the stock..."
For additional information, refer to About Form 3921, Exercise of an Incentive Stock Option Under Section 422(b).