Incentive Stock option with stock swap

[Linda Mathey]

I have a client that previously purchased shares of their employer's stock. They also had ISO's they wanted to exercise. They paid cash for one block of ISO’s and used their previously owned shares in a "stock for stock" swap for the other block of ISO’s. The AMT adjustment is easy to compute on the ones paid for in cash. In the stock for stock transaction do I use FMV of stock traded in which results in no AMT adjustment or does their original basis carryover? On the date of ISO exercise FMV of stock was about 200% of the exercise price. They only received the same number of shares they traded in and no cash difference