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president of Taylor Freezers, Inc. Petitioner Louise Kappus
(Mrs. Kappus) has resided and worked in Canada since 1976.
Petitioners timely filed a joint 1997 Federal income tax
return (U.S. joint return). On their return, petitioners
reported taxable income of $244,211 and income tax liability of
$69,410. Petitioners reduced their U.S. income tax liability to
zero by applying the foreign tax credit of $69,410. Petitioners
did not pay any U.S. Federal income taxes for 1997.
Attached to their U.S. joint return, petitioners also filed
Form 6251, Alternative Minimum Tax-Individuals. On Form 6251,
petitioners reported a precredit tentative minimum tax of $61,556
pursuant to section 55(b)(1)(A), an alternative minimum tax
foreign tax credit of $55,400, a tentative minimum tax of $6,156,
and an alternative minimum tax liability of zero. Petitioners
attached a statement to their U.S. joint return in which they
claimed exemption for alternative minimum tax on the basis of the
U.S.-Canada tax treaty.3
In the notice of deficiency, respondent determined that
petitioners’ precredit tentative minimum tax for 1997 was
$61,519. Respondent further determined that petitioners’
alternative minimum tax foreign tax credit could not exceed 90
3 The parties agree that the statement properly disclosed
petitioners’ treaty-based return position for purposes of sec.
6114.
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