Tax Preference Item
Any of various tax breaks afforded by the regular tax system that must be added back to your income to determine your alternative minimum tax (AMT) liability. When incentive stock options (ISOs) are exercised, the spread between the exercise price and the stock's market price, while not taxable in the regular tax system, is an item of tax preference that must be taken into account in the AMT calculation (unless the acquired shares are sold later during the year of exercise). This is one reason why the exercise of incentive stock options can trigger the AMT if the shares are held beyond the calendar year of exercise.
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