Here's how it goes.

The AMT, as you probably know, was brought in to stop well-heeled clever sox from using the tax laws too effectively in order to pay little or no tax, and says that if you earn more than $90,000 and have taken large deductions then you also have to calculate your tax bill under AMT rules, which don't allow any standard or personal exemptions. You also don't get a credit for any state taxes paid, nor are you allowed to take any miscellaneous itemized deductions. If the AMT calculation shows more tax than your calculation under normal rules, then you pay the higher amount.

If you're selling stock which you obtained by exercising ISOs this year, and the price you sell at is below the value at exercise, then the normal rules are that you pay income tax on the difference between the exercise price and the sale price - to get the 20% long-term capital gains tax rate you have to hold the shares for at least two years after the options are issued or one year after exercise, whichever is longer.

But if you are 'in' AMT, which many people are, the rules say that the whole difference between the exercise price and the value on exercise have to be taken in as taxable income. The only way out is to sell the shares, which is said to 'disqualify' them, and then you will only pay income tax on the difference between the exercise price and the sale price.

But be careful! If you 'bed-and-breakfast' the shares, buying them back in less than 30 days after sale, you will lose the right to escape AMT under the wash-sale rule, which says that if you sell a security at a loss, you must wait at least 30 days before you can buy back that same security, or the tax loss will be disallowed. That's true even if there isn't a loss because the rule helpfully adds a rider saying that you have to ask the question: If there were a loss, would the transaction be disallowed? For stock under an ISO which is sold out at between the exercise value and the exercise price, the answer is, yes, it would, so the whole transaction is 'caught'.

The way many shares are going right now, you probably want to wait a lot more than 30 days before buying them back again anyway!

To find out whether you're in AMT territory, you have to do the calculation, using tax preparation software like Intuit's TurboTax. IRS Form 6251 (Alternative Minimum Tax - Individuals) has more details on the calculation.