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I sold some ISO stock this year that I've held for the required holding period so they can be treated as long-term capital gains and looking on my Form 8949, I see that my CPA has used the FMV as the cost basis. I was a bit confused about this because I was expecting to pay more in taxes due to my research saying that for that type of sale, the cost basis should be the strike price. Which is correct?

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You are correct, the basis for ISOs is the strike price.

Your accountant may provide you with two versions of 8949 and schedule D, one for the regular tax and a separate one for the AMT. See the instructions for line 17 of Form 6251. The regular tax version of 8949 should use the strike price as the basis. The AMT version should use the AMT basis. The AMT basis is the fair market value “when your rights in the acquired stock first become transferable or when these rights are no longer subject to a substantial risk of forfeiture". This is generally the date of the exercise.

Because the AMT basis is higher, the AMT capital gains is lower, so you can recoup the AMT paid in the year of exercise, or reduce the AMT that would be due on other income in the year of sale. If you were not subject to AMT in either the year of exercise or the year of sale, the AMT version of 8949 isn’t needed.

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