Your client just exercised some stock she received from an ISO. She wants to keep the stock because it has long$-$term appreciation potential. Which one is the correct statement to make concerning the fact that she will be taxed on these exercises under the AMT method?

$($a$.)$ View the incremental tax that is paid for these exercises as a loan to the Government which will eventually be paid back. the ISOs and keeping the stock will create an AMT credit which can be used anytime. z

This is an example of an AMT exclusion and it will lead to a permanent tax increase.

The exercise of an ISO will be taxable for both tax methods $-$ regular and AMT.