We are witnessing the giant roulette, otherwise known as the American Economy. I think I have seen enough of its devastation to better understand what might have happened on that dark October day in 1929. People all around me are stunned by the sheer size and magnitude of financial disaster that is happening all around us. The stock market for high-tech companies has plummeted to levels which were unthinkable one year back.

This little bit of advice is for those of you who had stock options in your companies and you exercised those options last year. Find out if the stock options you had was an incentive stock option or a regular stock option. The former is available only to employees and the later may be provided to employees or other outsiders, e.g. consultants.

Now read carefully. If you had incentive stock options, you should be aware of the Alternative Minimum Tax (AMT). This tax is based on paper profits on the day you exercise the option and buy stock even if the stock later crashes and you lose the profits. It is triggered when you exercise an incentive stock option in one year and hold the stock into a later calendar year.

This used to work fine when the stock market was in an upswing, but now, many people are facing bankruptcy, because the AMT due is far more than the value for the stock, so much so that even if they liquidate the equity in their homes and plunder their 401K, they still will owe taxes.

So, if you think you have exercised incentive stock options last year and held on to the stock for one year, pick up the phone and call your tax advisor, H&R Block, CPA, whatever and get expert advice. Not many people know clearly what and how these stock options really work and even fewer know about whether they are exercising incentive stock and what are the applicable taxes.

The dream of financial independence of last year is fast changing to a nightmare for many of those who committed the same sin: They believed the stock market shared their faith in their companies.