William G. and Vivian Loomis - Page 5

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          the year of sale, gain realized from the sale or exchange of                
          property.  Section 453, however, provides an exception to this              
          rule.  Estate of Silverman v. Commissioner, 98 T.C. 54, 62                  
               Specifically, section 453 permits a taxpayer to report                 
          income from an "installment sale" under the "installment method."           
          Sec. 453(a).  Under the "installment method", a proportionate               
          amount of income is recognized in the year when a payment is                
          received.  Sec 453(c).  Respondent concedes that, under the                 
          installment method, petitioners properly reported income from the           
          contracts in 1992, the year they received payment.                          
               The dispute between petitioners and respondent, however,               
          centers on the proper application of the AMT.  Section 55(a)                
          imposes an alternative minimum tax in an amount equal to the                
          excess of the "tentative minimum tax" over the "regular tax".               
          The “tentative minimum tax” is computed based on a taxpayer's               
          “alternative minimum taxable income”.                                       
               To determine AMTI, taxable income is adjusted as provided by           
          sections 56 and 58.  After adjusting taxable income, as provided            
          in sections 56 and 58, the redetermined amount is increased by              
          the “items of tax preference”, as set out in section 57.  The               
          resulting amount constitutes a taxpayer's AMTI.  The AMTI in                
          excess of an exemption amount is multiplied by 24 percent to                
          determine the tentative minimum tax.                                        

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