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Petitioners are mistaken that qualified dividends may be
disregarded in the calculation of alternative minimum tax.
Alternative minimum tax is imposed, in addition to all other
taxes imposed under subtitle A, upon a taxpayer’s alternative
minimum taxable income (AMTI). Sec. 55(a); Allen v.
Commissioner, 118 T.C. 1, 5 (2002). AMTI is defined as the
taxpayer’s “taxable income” determined with adjustments provided
in sections 56 and 58, and increased by items of tax preference
described in section 57. Sec. 55(b)(2); Merlo v. Commissioner,
126 T.C. 205, 209 (2006), affd. 492 F.3d 618 (5th Cir. 2007).
The Code generally defines “taxable income” as “gross income”
less allowable deductions. Sec. 63(a). Section 61 expressly
defines “gross income” to include, without limitation,
“Dividends”. Sec. 61(a)(7).
In the computation of alternative minimum tax, qualified
dividends receive special treatment, insofar as they enter into
the net capital gain of noncorporate taxpayers. That special
treatment essentially caps the amount of alternative minimum tax
by reference to a formula that taxes net capital gain at rates
that mirror preferential rates that apply for regular tax
purposes under section 1(h).5 Contrary to what petitioners
5 More particularly, the alternative minimum tax is equal to
the excess of tentative minimum tax over the regular tax. Sec.
55(a). For a noncorporate taxpayer, the tentative minimum tax is
generally imposed at graduated 26 percent and 28 percent rates on
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