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ISO AMT in the Courts


ISO AMT in the U.S. Tax Court System

Many of ReformAMT members have pursued justice in Tax Court for their ISO AMT problems. And although the Courts have periodically expressed sympathy to the ISO AMT situation, they have consistently made it clear that our only hope for relief lies with Congress and the legislative process.

Congress, you are our only hope! We implore you to please seize the day and keep us from being destroyed by the unintended consequences of this outdated, poorly written, and unfair law. Please pass full and fair relief legislation in 2006.

Notable quotes from Judges and the IRS:

  • Tax Court Judge Cohen in the Spletz case:

    Judge Cohen, in Hearing in Open Court, "Well, Congress has to fix the problem that there are circumstances under which the timing of the tax or the incidence of taxation on the exercise of the option results in an unfair consequence later."

    Later in the Hearing, the Judge states, "I think that Respondent (the IRS) is defining financial hardship and special circumstances too narrowly. You;re just looking at basic living expenses. The disproportion of the amount of the liability, regardless of the source [ISO AMT or otherwise], has to be a factor ... I don't think that you can just say that a taxpayer can give up everything else and pay the amount when a taxpayer has a family and children in school and needs transportation to continue to work and has other obligations, such as to the bank. I mean, I'd like to know where those other factors come into play in the determination?"

    Judge Cohen, in Speltz Opinion, "We believe that here ... the solution must be with Congress."

  • The IRS in the Wai case:

    "It is the current position of Appeals that Offers submitted based solely on the merits of the ISO-AMT issue, do NOT qualify for consideration under the principles of ETA. Currently, there is no provision in the law that allows consideration of ETA-OIC's due to AMT on stock options. Our position remains that Congress must enact a change in the law with respect to the AMT on stock options before we will give consideration to the merits of an offer submitted under ETA based solely on this issue. We will NOT set precedent at this time with reviewing or accepting ETA-OIC's based on the ISO-AMT issue until a change in the law has been made. Appeals also has no authority at this time to suspend any of these ETA-OIC's currently in inventory until such time, if any, that a change in the law is made."

  • Judge Haines in the Spitz Case sites other Judges from various Districts around the country on the matter of AMT:

    "This Court has previously stated the unfortunate consequences of the AMT in various circumstances have been litigated since shortly after the adoptio of the AMT. In many difference contexts, literal application of the AMT has led to a perveived hardship, but challenges based on equity have been uniformly rejected ... it is not a feasible judicial undertaking to achieve global equity in taxation ... and if it were a feasible judicial undertaking, it still would not be a proper one, equity in taxation being a political rather than a jural concept ... the solution must be with Congress."


Other ISO-AMT cases:

  • Don and Katherine Hernandez v. United States of America, No. CV 04-9365 SJO (MANx), United States District Court for the Central District of California Western Division

  • Robert and Patricia Humphrey v. Commissioner of Internal Revenue, Docket No.: 19295-03L, filed in United States Tax Court

  • Anthony Kadillak v. Commissioner of Internal Revenue, Docket No. 2860-04L, filed in United States Tax Court

  • Steven S. Hubbard and Kathleen M. Hubbard, v. United States of America, Case No. C03-2972JLR United States District Court for the Western District of Washington

  • Evan and Carol Marcus v. Commissioner of Internal Revenue, Docket No.: 10679-05, filed in United States Tax Court

  • Robert Merlo v. Commissioner of Internal Revenue, No. 21538-03, filed in United States Tax Court

  • Nield and Linda Montgomery v. Commissioner of Internal Revenue, No. 16864-02L, filed in United States Tax Court

  • Paul Norman v. United States of America, Case No. C05-02059 RMS-RS, filed in United States District Court for the Northern District of California San Jose Division

  • Mark Spitz v Commissioner of Internal Revenue, Docket No. 4076-05, filed in United States Tax Court 8/2006

  • Daniel Pierce and Hendy Lund v. United States, No 05-1071T, filed in United States Federal Court of Claims

  • Gregory Poilasne and Lauren Guzak v. United States, No. 05-1070T, filed in United States Federal Court of Claims

  • Palahnuk v. Commissioner, No. 12015-05, 127 T.C. No. 9, 10/11/06

  • Jackie L. and Janet G. McDONALD, Petitioners-Appellees v. COMMISSIONER OF INTERNAL REVENUE, Respondent Appellant No. 83-4588 UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

  • RONALD J. AND JUNE M. SPELTZ, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent UNITED STATES TAX COURT 124 T.C. 165; 2005 U.S. Tax Ct. LEXIS 9; 124 T.C. No. 9 March 23, 2005, Filed SUBSEQUENT HISTORY: Affirmed by Speltz v. Comm'r, 2006 U.S. App. LEXIS 17690 (8th Cir., July 14, 2006) 8th Circuit Court of Appeals

  • DANIEL D. MOSS, Plaintiff, v. UNITED STATES OF AMERICA, Defendant Civ. No. 04-1803-PK UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

  • CHI WAI, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent No. 19316-04L UNITED STATES TAX COURT

  • Pavlosky v. United States (No 05-3350) CASE NO. 05-31127-H2-13 IN RE: JAMES PAVLOSKY and DEBORAH THUMANN-PAVLOSKY, Debtor; JAMES PAVLOSKY and DEBORAH THUMANN-PAVLOSKY, Plaintiffs vs. UNITED STATE OF AMERICA (IRS), Defendant CASE NO. 05-31127-H2-13, ADVERSARY NO. 05-3350 UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION


Tips for finding out more:

To read about these cases, start at www.ustaxcourt.gov and search for the last names (under "case name keyword").

After that, clear all the boxes on the search page, and type "ISO" or "incentive stock" or "incentive stock" AND "alternative minimum". You'll get some cases, such as Montgomery, Wiese, Merlo, Spitz, Speltz, Wai.

As for other courts, try the websites directly:

  • Their websites are their postal abbreviation, followed by the district location, followed by ".uscourts.gove" For example. the Eastern District of Missouri is www.MOED.uscourts.gov, which is "MO" plus "ED", plus ".uscourts.gov"

  • It it's just the "District Court of ... ", without the Eastern/Southern/etc., then just use "D". For example, the Kansas District Court is www.KSD.uscourts.gov
If there is a charge for cases, try www.legalbitstream.com, a free tax database.