Reporting the exercise of incentive stock options and the shares are not sold in the same yearIncrease your AMT income by the spread between the fair market value of the shares and the exercise price. This can be calculated using data found on Form 3921 provided by your employer. First, find the fair market value of the unsold shares (Form 3921 box 4 multiplied by box 5), and then subtract the cost of those shares (Form 3921 box 3 multiplied by box 5). The result is the spread, and is reported on Form 6251 line 14.
Because you are recognizing income for AMT purposes, you will have a different cost basis in those shares for AMT than for regular income tax purposes. Accordingly, you should keep track of this different AMT cost basis for future reference. For regular tax purposes, the cost basis of the ISO shares is the price you paid (the exercise or strike price). For AMT purposes, your cost basis is the strike price plus the AMT adjustment (the amount reported on Form 6251 line 14).
Reporting a qualifying disposition of ISO sharesReport the gain on your Schedule D and Form 8949. You'll report the gross proceeds from the sale, which will be reported by your broker on Form 1099-B. You'll also report your regular cost basis (the exercise or strike price, found on Form 3921). You'll also fill out a separate Schedule D and Form 8949 to calculate your capital gain or loss for AMT purposes. On that separate schedule you'll report gross proceeds from the sale and your AMT cost basis (exercise price plus any previous AMT adjustment). On Form 6251, you'll report a negative adjustment on line 17 to reflect the difference in gain or loss between the regular and AMT gain calculations. Refer to the Instructions for Form 6251 for details.