When I get all libbie and Red on you, and you want the magic bullet to just shoot me down and maybe even get me on your side for 30 or 40 seconds, just say this: AMT.

That's all I'll say on this, the annual occasion of my feeling like a Republican.

When I get all libbie and Red on you, and you want the magic bullet to just shoot me down and maybe even get me on your side for 30 or 40 seconds, just say this: AMT.

That's all I'll say on this, the annual occasion of my feeling like a Republican.

can i play?

annual mortgage tax?
awful mexican town?
uuhhh..
average mullet trim?
come on ed....this aint fair!

can i play?

annual mortgage tax?
awful mexican town?
uuhhh..
average mullet trim?
come on ed....this aint fair!
If you don't know what AMT is, count yerself lucky.

When I get all libbie and Red on you, and you want the magic bullet to just shoot me down and maybe even get me on your side for 30 or 40 seconds, just say this: AMT.

That's all I'll say on this, the annual occasion of my feeling like a Republican.

I haven't heard that Republicans shouting for the repeal of the AMT. It's too big a moneymaker to get repealed. I think in a few more years when it really starts taking a nasty bite out of more of the middle class, then there might be some political capital to be made in fighting the AMT.

Personally, I think that some Dems should get an anti-AMT bandwagon rolling. Now that would be some tax reform worth a darn.

If you don't know what AMT is, count yerself lucky.

i figured tax related but i'm nowhere the income of a libbie strategerist and working mullet into the conversation seemed to work with the kentucky theme and all.

i figured tax related but i'm nowhere the income of a libbie strategerist and working mullet into the conversation seemed to work with the kentucky theme and all.
Retired strategerist. Still farming and exploiting Mexicans, and slum landlording though. A libbie has to stay busy.

Retired strategerist. Still farming and exploiting Mexicans, and slum landlording though. A libbie has to stay busy.

really, do you farm?

Retired strategerist. Still farming and exploiting Mexicans, and slum landlording though. A libbie has to stay busy.
well I did some digging and this is supposedly what triggers AMT:

The characteristics most likely to give rise to AMT liability for taxpayers who do not operate businesses are large numbers of personal exemptions, large amounts of state and local taxes paid, large amounts of miscellaneous itemized deductions, large deductible medical expenses, incentive stock options, and large capital gains. So if you have any combination of these issues on your tax return, you may have the unpleasant surprise of paying the AMT.

I don't think you have 8 kids so which of the others get you into AMT-land? Sounds like a good problem to have--either you are making tons of capital gains or able to itemize tons of stuff. Is it just that you hate paying the extra tax or am I missing something here?

really, do you farm?
Lord Jesus yes. 200 acres. Corn, alfalfa, horses, soybeans ....

well I did some digging and this is supposedly what triggers AMT:


I don't think you have 8 kids so which of the others get you into AMT-land? Sounds like a good problem to have--either you are making tons of capital gains or able to itemize tons of stuff. Is it just that you hate paying the extra tax or am I missing something here?
Rental property. Farming.

Rental property. Farming.
aha! So is AMT triggered even if you aren't turning a profit?

The AMT is a good thing, but any time that congress enacts a rule that is triggered for a given dollar amount, that amount should be indexed for inflation.

When I get all libbie and Red on you, and you want the magic bullet to just shoot me down and maybe even get me on your side for 30 or 40 seconds, just say this: AMT.

That's all I'll say on this, the annual occasion of my feeling like a Republican.

What's wrong with the AMT? Only rich people have to pay it. It prevents them from paying no taxes, which the Democrats are always whining about.

The most interesting part is that the AMT accounts for such a huge chunk of revenue at this point that within a couple of years, it would be cheaper to scrap the regular income tax and just leave the AMT in place.

aha! So is AMT triggered even if you aren't turning a profit?
I have no idea. I don't understand the thing. All I know is, I went in thinking I was in great shape because I'd really paid through the nose in quarterly estimates this year, and I had quickly calculated 'likely tax' in my head and figured I was good, but the drunken accountants yesterday told me that, nope, I was one of the lucky AMTers.

Yep, next thing you know Dems will be out there saying we MUST have AMT reform! I'm sure our base will love it.

What's wrong with the AMT? Only rich people have to pay it. It prevents them from paying no taxes, which the Democrats are always whining about.

The most interesting part is that the AMT accounts for such a huge chunk of revenue at this point that within a couple of years, it would be cheaper to scrap the regular income tax and just leave the AMT in place.
While it's true that the rich pay a larger portion of taxes than the poor, don't you admit that most of the loopholes benefit the rich in the first place? I assume AMT was designed to mitigate that though I'm not sure how well it has done that in practice. Some poor family who is barely putting food on the table isn't gonna care much about the estate tax being repealed, capital gains tax, or some new deduction for rental income.

Only rich people have to pay it.

I guess that makes me rich. I had no idea.

What's wrong with the AMT? Only rich people have to pay it. It prevents them from paying no taxes, which the Democrats are always whining about.

The most interesting part is that the AMT accounts for such a huge chunk of revenue at this point that within a couple of years, it would be cheaper to scrap the regular income tax and just leave the AMT in place.
Just on the day it grabs you by the nuts. I'll get over it!

The AMT is a good thing, but any time that congress enacts a rule that is triggered for a given dollar amount, that amount should be indexed for inflation.

Only someone who hasn't been burned by AMT could possibly think it is a good thing.

I have no idea. I don't understand the thing. All I know is, I went in thinking I was in great shape because I'd really paid through the nose in quarterly estimates this year, and I had quickly calculated 'likely tax' in my head and figured I was good, but the drunken accountants yesterday told me that, nope, I was one of the lucky AMTers.

Yep, next thing you know Dems will be out there saying we MUST have AMT reform! I'm sure our base will love it.
I think the basic problem here is that our tax code is so damn complicated that even the experts don't understand it. I was lucky this year and will get a refund, but who knows what would happen if I was granted a few extra stock options or the like? While I think that Forbes' flat tax was fatally flawed, it would be nice to know that you will pay something like 40% of your income to taxes up front.

Only someone who hasn't been burned by AMT could possibly think it is a good thing.
'Burned.' Exactly. I thought I'd been a good tax boy. Nope.

Dammit, I'm lapsing back into Republicanism. I need to get off this topic.

'Burned.' Exactly. I thought I'd been a good tax boy. Nope.

Dammit, I'm lapsing back into Republicanism. I need to get off this topic.
You have every right to be angry Ed...It's YOUR money! ;)

While it's true that the rich pay a larger portion of taxes than the poor, don't you admit that most of the loopholes benefit the rich in the first place? I assume AMT was designed to mitigate that though I'm not sure how well it has done that in practice. Some poor family who is barely putting food on the table isn't gonna care much about the estate tax being repealed, capital gains tax, or some new deduction for rental income.

Obviously most "loopholes" benefit the rich. When you're only paying $100 in taxes, the most a loophole can save you is $100. When you're paying $100,000, the same "loophole" gives you a hell of a lot more benefit.

The AMT doesn't even kick in unless you have household income of $175K (assuming two filers). We're not taking food off some "poor" family's table, we're making sure people pay something close to what they should.

I guess that makes me rich. I had no idea.

Most people don't think they're rich. But in the scope of things, if you're paying AMT, you're rich.

Most people don't think they're rich. But in the scope of things, if you're paying AMT, you're rich.
Or at least not Joe Sixpack. :)

Only someone who hasn't been burned by AMT could possibly think it is a good thing.

That is like saying that everyone who ever got a speeding ticket things that there should be no laws governing fast driving. I suggested that it should be indexed for inflation because it is cutting into the middle class, which is was never intended to do.

That is like saying that everyone who ever got a speeding ticket things that there should be no laws governing fast driving. I suggested that it should be indexed for inflation because it is cutting into the middle class, which is was never intended to do.

It's not cutting into the middle class. It's cutting into what we have convinced ourselves is the middle class. Even if you made double the median income, you wouldn't be close to the AMT trigger. If you made triple the median income, you'd be getting there. These folks aren't "middle class" - they're rich.

It's fun to soak the rich, until you become one of them, isn't it?

Most people don't think they're rich. But in the scope of things, if you're paying AMT, you're rich.

I don't know about that. I know that a lot of people who briefly thought they were rich ended up bankrupt because they had to pay AMT on underwater stock options.

It's fun to soak the rich, until you become one of them, isn't it?

but it is so much more fun to watch the poor get soaked. especially in the rain when they did not remember to bring an umbrella. then Sorelian laughs the laugh of someone who remember the umbrella and knows how to operate it properly. besides the rich do not need to get wet they can walk in between the raindrops.

That is like saying that everyone who ever got a speeding ticket things that there should be no laws governing fast driving. I suggested that it should be indexed for inflation because it is cutting into the middle class, which is was never intended to do.

I don't understand your point about speeding tickets. Speeding is illegal, so complaining about it is just whining. AMT is legalized robbery, but as long as we convince ourselves that only the "rich" pay it, I guess it must be okay.

It's funny that you say it's good, then you point out one of the huge flaws in it. It can't be all that good if it is seriously flawed.

It's fun to soak the rich, until you become one of them, isn't it?Finding something personally bothersome isn't the same as finding it philosophically objectionable.

The AMT is a great idea, I support it 100 percent. After yesterday I don't have any PERSONAL fondness for it, but there's a lot of public policy positions I take that wouldn't exactly benefit me personally. I'm not, you know, Doug or Steam or somebody. ;-)

It's fun to soak the rich, until you become one of them, isn't it?
Also why most rich people become Republicans if they are voting purely out of self-interest.

The AMT doesn't even kick in unless you have household income of $175K (assuming two filers).

That is so not true. If you have ISO stock options, you can trigger a world of AMT pain, at any income level.

That is so not true. If you have ISO stock options, you can trigger a world of AMT pain, at any income level.

Not true. An exercised ISO is, by definition, income.

My heart bleeds for those people who exercised $200K of stock options.

These people made bad investment decisions, they should owe the same taxes that any other investor who makes bad decisions owes.

I don't know about that. I know that a lot of people who briefly thought they were rich ended up bankrupt because they had to pay AMT on underwater stock options.

They WERE rich when they created their tax liability - they have to pay it. That's like saying: I won the lotto, but I spent it all on the Brooklyn Bridge, so I don't have enough money to pay the taxes on my lotto winnings. Sorry. I love it when loopholes close on people who think they're on some kind of Government gravy train.

Not true. An exercised ISO is, by definition, income.

My heart bleeds for those people who exercised $200K of stock options.

These people made bad investment decisions, they should owe the same taxes that any other investor who makes bad decisions owes.
does AMT kick in on unvested stock options or just those that you cash in? I would think it would be the latter and if you're making that much from stock options I don't see the huge issue with having to pay the piper. A good number of people don't see any stock options from their employment.

Not true. An exercised ISO is, by definition, income.

My heart bleeds for those people who exercised $200K of stock options.

These people made bad investment decisions, they should owe the same taxes that any other investor who makes bad decisions owes.

Isn't a bad investment decision when you sell stock and lose money? Most people would say that selling stock for a large gain is not a bad investment decision. You can pay the taxes from the gain. That's not what I'm talking about.

The problem is that under AMT you are taxed as if you sold the stock and made a huge gain, even if when you never sold and <u>still own the stock</u>. There's no gain or loss until you sell, but you are taxed on it anyway? Please explain how that makes any sense.

does AMT kick in on unvested stock options or just those that you cash in? I would think it would be the latter and if you're making that much from stock options I don't see the huge issue with having to pay the piper. A good number of people don't see any stock options from their employment.

Only on exercised options. The crap situation that is being referred to is:

I have 10 call ISOs with a strike price of $100. My Company's stock is at $300. I exercise my options, making $2,000 - which is taxable under the AMT. But I don't sell the stock - I hold onto it. My Company's stock plummets to $1. I can only write off a small amount of the loss, but I'm still on the hook for taxes on the whole $2,000 that I "made" - even though I never saw a dollar of cash. It was quite common when the market bubble was bursting, not so much anymore.

Isn't a bad investment decision when you sell stock and lose money? Most people would say that selling stock for a large gain is not a bad investment decision. You can pay the taxes from the gain. That's not what I'm talking about.

The problem is that under AMT you are taxed as if you sold the stock and made a huge gain, even if when you never sold and <u>still own the stock</u>. There's no gain or loss until you sell, but you are taxed on it anyway? Please explain how that makes any sense.

You had something that was worth nothing at the beginning of the year (the unvested option). Over the course of the year, it became worth something (the actual stock) - you have just received something of value. This is "income". Whether you sell what you have received or not is irrelevant - you have already received the income from it.

The appropriate investment decision is to sell enough of the stock at exercise to cover the taxes. Otherwise, you're taking a big risk.

You had something that was worth nothing at the beginning of the year (the unvested option). Over the course of the year, it became worth something (the actual stock) - you have just received something of value. This is "income". Whether you sell what you have received or not is irrelevant - you have already received the income from it.

The appropriate investment decision is to sell enough of the stock at exercise to cover the taxes. Otherwise, you're taking a big risk.

My home has appreciated over $100K in a couple of years. Based on what you just said, I should be taxed on that as well. Except I'm not. I'm not taxed because gains don't exist until they are created, <u>by selling</u>. Until you commit to a sale price, any gain is purely theoretical. Holding an asset is not enough. Based on what you just said, my house could slide into the ocean and I would still be taxed on the $100K gain.

It does not make sense.

My home has appreciated over $100K in a couple of years. Based on what you just said, I should be taxed on that as well. Except I'm not. I'm not taxed because gains don't exist until they are created, <u>by selling</u>. Until you commit to a sale price, any gain is purely theoretical. Holding an asset is not enough. Based on what you just said, my house could slide into the ocean and I would still be taxed on the $100K gain.

It does not make sense.

Not true. An option is a completely different thing than a stock. By exercising the option, you have made money. You are not simply "holding" something - you are exercising an option to buy. If you had an option to buy your house for $10,000, and it was worth $100K, the same thing would occur.

They WERE rich when they created their tax liability - they have to pay it. That's like saying: I won the lotto, but I spent it all on the Brooklyn Bridge, so I don't have enough money to pay the taxes on my lotto winnings. Sorry. I love it when loopholes close on people who think they're on some kind of Government gravy train.

Where is the loophole? You phrase this like it's some kind of avoidance issue. I am not talking about avoiding paying taxes when stock is sold. That is fraud. I'm talking about a straight up tax code where I am taxed on the income I made, not the income I could have made. If I win the lottery, I have cash in hand. If I own stock, I have paper, which I may be able to convert into cash, at which point I should be taxed.

The better example is if I buy a lottery ticket for a future drawing. It could potentially win millions, so should I be taxed on that theoretical gain? AMT says YES when it comes to stock options. That is the absurdity in the system, and you can't explain that away.

Where is the loophole? You phrase this like it's some kind of avoidance issue. I am not talking about avoiding paying taxes when stock is sold. That is fraud. I'm talking about a straight up tax code where I am taxed on the income I made, not the income I could have made. If I win the lottery, I have cash in hand. If I own stock, I have paper, which I may be able to convert into cash, at which point I should be taxed.

The better example is if I buy a lottery ticket for a future drawing. It could potentially win millions, so should I be taxed on that theoretical gain? AMT says YES when it comes to stock options. That is the absurdity in the system, and you can't explain that away.

I think we're going to have to agree to disagree on this one. But I've got decades of corporate accounting practice on my side. You can decide to look at stock options however you want, but the Government has always been consistent (as they should, IMO) in saying that a gain on an option occurs when it is exercised. If you buy something for below market value (anything) you have to take the gain as income in the year that you bought it.

The fact is that it is EASY to avoid AMT trouble by selling enough stock at exercise to cover the tax.

Where is the loophole? You phrase this like it's some kind of avoidance issue. I am not talking about avoiding paying taxes when stock is sold. That is fraud. I'm talking about a straight up tax code where I am taxed on the income I made, not the income I could have made. If I win the lottery, I have cash in hand. If I own stock, I have paper, which I may be able to convert into cash, at which point I should be taxed.

The better example is if I buy a lottery ticket for a future drawing. It could potentially win millions, so should I be taxed on that theoretical gain? AMT says YES when it comes to stock options. That is the absurdity in the system, and you can't explain that away.
so maybe you should be taxed immediately upon exercising your options. Seems to me that the only problem here is that you held onto them too long and now have to pay based on the profit your COULD have made if you chose to sell immediately. If you buy a house for $100k and then someone disovers you have a nuclear waste dump in your backyard making the value drop to $10k do you expect to have your mortgage adjusted to compensate for your loss?

Yup, the option is the asset. Always, always pay the tax on your gains when realizing them. Especially with securities.

Meaning, don't keep all of the $2,000. Sell off 40% right away and put it on your tax bill.

so maybe you should be taxed immediately upon exercising your options. Seems to me that the only problem here is that you held onto them too long and now have to pay based on the profit your COULD have made if you chose to sell immediately. If you buy a house for $100k and then someone disovers you have a nuclear waste dump in your backyard making the value drop to $10k do you expect to have your mortgage adjusted to compensate for your loss?

Apples and oranges on the mortgage thing.

Profit is the difference between the price you buy something for and the price you get when you sell it. I am all for taxing that. Profit is gain, and gain should be taxed.

If I hold on to something, by definition there is no profit, because I have to sell the thing to make a profit. Until I sell, profit is theoretical, and I do not understand how a theoretical profit could be taxed.

Apples and oranges on the mortgage thing.

Profit is the difference between the price you buy something for and the price you get when you sell it. I am all for taxing that. Profit is gain, and gain should be taxed.

If I hold on to something, by definition there is no profit, because I have to sell the thing to make a profit. Until I sell, profit is theoretical, and I do not understand how a theoretical profit could be taxed.

But the mechanics of an option exercise are that you SELL the option and BUY the stock. You have SOLD something of value for a profit.

please tell me that you have a cross' course set up, or at least serpentine single track.

Drool.

BT

please tell me that you have a cross' course set up, or at least serpentine single track.

Drool.

BT

funny, I was thinking the same thing.....200 acres more than enough.

Not true. An option is a completely different thing than a stock. By exercising the option, you have made money. You are not simply "holding" something - you are exercising an option to buy. If you had an option to buy your house for $10,000, and it was worth $100K, the same thing would occur.

No you didn't, there was no change in the bank account, only a theoritical gain on paper. If said stock goes up even more and you sell you have to pay the gains on that too, not just from your strike price. Explain the discrepancy.

If you don't sell a stock, you will never have to pay the gains. Capital disbursements and dividends however, will incurr a gain.

Even though you don't change the bank account, you had sold a financial instrument (the option). Proceeds of the option sale are the FMV of the stock less options strike price. Financial gain=taxes payable.

I've never ever had either the AMT or company stock options. Apparently I'm doing something wrong.

Is this why you are a proponent of a moneyless society this week, OldEd?
As I said before...AMT is often a good problem to have...it means you are making a lot of money. As far as the stock options scenario I think the lesson is to sell immediately to cover taxes even if you want to hold onto the rest of the shares for the long term. Hold all of it and your risk level goes way up.

Yep, I get how it works. The lesson on the stock options is to understand the implications and plan for the taxes. How you do it can differ depending on how much your gain is and your position cash-wise and tax-wise.

It still stinks that I've never had company stock options to deal with though.
I have some (not a lot) but not many vested yet.

When I get all libbie and Red on you, and you want the magic bullet to just shoot me down and maybe even get me on your side for 30 or 40 seconds, just say this: AMT.

That's all I'll say on this, the annual occasion of my feeling like a Republican.

Makes a whole sh**load of deductions worthless.

Maybe we should have general elections the first Tuesday after April 15 each year, rather than November?

Obviously most "loopholes" benefit the rich. When you're only paying $100 in taxes, the most a loophole can save you is $100. When you're paying $100,000, the same "loophole" gives you a hell of a lot more benefit.

The AMT doesn't even kick in unless you have household income of $175K (assuming two filers). We're not taking food off some "poor" family's table, we're making sure people pay something close to what they should.



What's wrong with the AMT? Only rich people have to pay it.

so you're saying a two-income family making $175,000 are rich? good to know for future reference.

Makes a whole sh**load of deductions worthless.

Maybe we should have general elections the first Tuesday after April 15 each year, rather than November?

Doug, you could be on to something. Every four years, combine voting with taxes. The incumbant would never survive. Still a pretty good idea though.

But the mechanics of an option exercise are that you SELL the option and BUY the stock. You have SOLD something of value for a profit.

Dammit, that actually makes sense. How come no one has ever explained it that clearly?

It's still a screwed system. You'll never convince me that the ISO handling is fair.

so you're saying a two-income family making $175,000 are rich? good to know for future reference.

Just to confirm, yes, I believe this family to be rich.

Just to confirm, yes, I believe this family to be rich.
Hell, dude, by current and historical world standards, a two earner family making 30K a year (or even less really) is rich beyond the wildest imagination of 99.99 percent of every human who ever lived. We have utterly and compeletly lost perspective in Modren Day America.

At 175K annually, you're rich as a freakin God on Olympus by any reasonable standard anyone cares to apply. I said reasonable. Don't bring modern American 'values' or Steam into this.

Here Ol' buddy. Hope this helps. Heck I told you to use me as a dependant ;)

http://moneycentral.msn.com/articles/tax/basics/6647.asp

Hell, dude, by current and historical world standards, a two earner family making 30K a year (or even less really) is rich beyond the wildest imagination of 99.99 percent of every human who ever lived. We have utterly and compeletly lost perspective in Modren Day America.

At 175K annually, you're rich as a freakin God on Olympus by any reasonable standard anyone cares to apply. I said reasonable. Don't bring modern American 'values' or Steam into this.

Couldn't agree more.

Just to confirm, yes, I believe this family to be rich.
agree totally...If both are making 85k plus you are doing pretty well. Whether you choose to spend all of that on fancy cars, houses and boats is your business, but I'd imagine most anyone could live VERY comfortably on that kind of money.

Just to confirm, yes, I believe this family to be rich.

remember this when you and others whine about taxes on the rich, and moan about how people making $200,000 aren't rich.

remember this when you and others whine about taxes on the rich, and moan about how people making $200,000 aren't rich.

I don't really follow. I fully agree that people making $200k are rich, and I believe they shouldn't have a significantly more burdensome tax liability than those making $50k. I think it's usually those on the other side of the table arguing that $200K is "middle class"- struggling to survive - and only want to tax the super-duper rich.

I don't really follow. I fully agree that people making $200k are rich, and I believe they shouldn't have a significantly more burdensome tax liability than those making $50k. I think it's usually those on the other side of the table arguing that $200K is "middle class"- struggling to survive - and only want to tax the super-duper rich.


no, it's when we say that those making over a certain amount should be taxed more, you can use this $200,000 level as an example, then steam and doug et al come on and whine about how $200,000 isn't rich, that that kind of income doesn't go as far today as it used to, and that these people are decidely middle class, just barely getting by after the mortgage on their half-million dollar house, car payments on the bmw, and college bills for the two kids.

no, it's when we say that those making over a certain amount should be taxed more, you can use this $200,000 level as an example, then steam and doug et al come on and whine about how $200,000 isn't rich, that that kind of income doesn't go as far today as it used to, and that these people are decidely middle class, just barely getting by after the mortgage on their half-million dollar house, car payments on the bmw, and college bills for the two kids.

I haven't seen the argument go that way, because it cedes the main point - that the tax system should be progressive, it's just a question of where the brackets fall. Typically, the argument is whether the system should be progressive at all. Otherwise, we would all agree that Bill Gates should face a 100% tax, and we don't agree on that.

I haven't seen the argument go that way, because it cedes the main point - that the tax system should be progressive, it's just a question of where the brackets fall. Typically, the argument is whether the system should be progressive at all. Otherwise, we would all agree that Bill Gates should face a 100% tax, and we don't agree on that.
I suppose the answer changes the closer one's income gets to Bill Gates'.

Nearly 70 replies to this post which was addressed to me, and mine was not amongst them 'til now.

I feel your pain. Really.