- 4 -
gross income. See sec. 56(b)(1). Also, no deduction for
personal exemptions under section 151 is allowed. See sec.
56(b)(1)(E).
Petitioners incorrectly completed the form submitted with
their return in calculating their liability for AMT. On part III
of the form, petitioners correctly listed their exemption amount
as $45,000 on line 22. On line 23 (which subtracts the exemption
amount from the AMTI, line 21), petitioners listed $28,873, which
respondent corrected to $24,811, an adjustment that favors
petitioners. Line 24 then provides the following directions: "If
line 23 is $175,000 or less ($87,500 or less if married filing
separately), multiply line 23 by 26% (.26). Otherwise, multiply
line 23 by 28% (.28) and subtract $3,500 ($l,750 if married
filing separately) from the result". Petitioners calculated the
entry for line 24 on the basis of the second sentence recited
above in which they multiplied the amount on line 23 by 28
percent, from which they subtracted $3,500. The resulting
amount, which they listed on line 24, was less than their tax
liability of $4,091 shown on their Form 1040, U.S. Individual
Income Tax Return. Thus, since the tentative minimum tax was
less than the tax shown on Form 1040, petitioners entered -0- on
line 28, AMT. In the notice of deficiency, respondent calculated
the AMT as 26 percent of line 23 without a reduction of $3,500.
This resulted in an amount on line 24 that exceeded the tax shown
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