This occurs when you sell property, such as ISO stock, on which you have paid AMT. The "adjustment" in the year of sale is not exactly an adjustment. It is the difference between the capital gain (or loss) for regular tax purposes and the gain (or loss) for AMT that results from the difference in the tax basis. If the loss for AMT purposes exceeds $3,000, the adjustment is limited. See IRS Form 6251 and its instructions. See also a related FAQ elsewhere on this website.