- 12 -
1. The AMT Limits the Use of Nonrefundable Credits as Well as
Preferences and Exclusions
Petitioners would recompute AMTI by excluding certain
preferences that are not otherwise deductible from AMTI. If
successful, petitioners would lower their TMT and thereby augment
the availability of section 29 credits under the section 29(b)(5)
limitation. In effect, petitioners would increase the spread
between RIT and TMT. Thus, petitioners seek to do, indirectly,
that which the Code does not allow directly: apply nonrefundable
credits against TMT. See S. Rept. 99-313, supra, 1986-3 C.B. at
537.
If section 59(g) applied in the manner petitioners advocate,
taxpayers with sufficient amounts of nonrefundable credits as
well as adjustments and/or preferences would be able to
completely avoid Federal income tax liability, despite having
large economic incomes. Respondent's brief offers a useful
illustration of how petitioners' position skirts Congress' intent
in enacting the AMT. See First Chicago Corp. v. Commissioner,
842 F.2d at 181.
Suppose that for 1990 a taxpayer, with no foreign tax
credits, had $1 million of gross income and $1 million of
preferential deductions. Although the taxpayer would have no RIT
liability, the taxpayer would have AMT liability because
preferential deductions are not allowable in computing minimum
taxable income. But if the taxpayer also had sufficient
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011