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Incentive Stock Options And The Alternative Minimum Tax: The Worst Of Times, Francine J. Lipman

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Congress enacted the Alternative Minimum Tax ("AMT") to stop high-income individuals from escaping their tax liabilities through tax code loopholes. In recent years, increasing numbers of moderate-income taxpayers have been subject to astronomical AMT liabilities. The problem has been especially acute for technology sector employees who exercised stock options while the market was high, sold their stock after its value fell, and found themselves owing AMT they could not afford to pay. In this Essay, Professor Lipman explains the Internal Revenue Code's complicated treatment of Incentive Stock Options ("ISOs"). She argues that the AMT adjustment for ISOs should not be …