Form 3921, Exercise of an Incentive Stock Option Under Section 422(b), is a form provided to a taxpayer when they exercise an incentive stock option (ISO). The form is required to be furnished to a taxpayer by January 31 of the year following the year of the exercise of the ISO.
No income is recognized when an ISO is exercised. However, a return that includes AMT must include in AMT income the excess of the fair market value of the stock over the amount paid, and this adjustment becomes part of the AMT basis of the stock. However, if the stock is sold or otherwise disposed of in the same year as the ISO, no adjustment is required. See the Form 6251 instructions for more information.
The taxpayer needs to retain the form as it will be needed to calculate the gain or loss when the stock is sold or otherwise disposed of.
Additional Information: