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deduction of $2,257.77 for student loan interest paid during
1998. Petitioners did not file Form 6251, Alternative Minimum
Tax--Individuals, with their 1998 Federal income tax return.
In a notice of deficiency, respondent determined that
petitioners were not entitled to the student loan interest
deduction because they were not eligible for the deduction under
section 221(b). Respondent further determined that petitioners
were subject to the alternative minimum tax for 1998.
A deduction is allowed on interest paid by a taxpayer on any
“qualified education loan” in the year paid. Sec. 221(a). A
“qualified education loan” means any indebtedness incurred to pay
qualified higher education expenses which are incurred by the
taxpayer or the taxpayer’s spouse, paid or incurred within a
reasonable period of time before or after the indebtedness was
incurred, and attributable to education during a period the
recipient was an eligible student. Sec. 221(e)(1). Married
taxpayers must file joint returns in order to qualify for the
deduction. Sec. 221(f)(2). The maximum deduction allowed for
tax year 1998 was $1,000. Sec. 221(b)(1).
For a moderate-income taxpayer the deduction for qualified
education loan interest is phased out according to the taxpayer’s
modified adjusted gross income (modified AGI). Sec. 221(b)(2).
The phaseout begins at a modified AGI level of over $60,000 for
joint return filers. Sec. 221(b)(2)(B)(i)(II). The deduction is
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Last modified: May 25, 2011