- 3 - State and local taxes paid $14,789 Real estate taxes paid 1,425 Interest paid 10,972 Charitable contributions 5,120 Job expenses and other miscellaneous deductions (in excess of 2% of adjusted gross income) 30,542 Less: Overall limitation on itemized deductions(2,503) Total itemized deductions 60,345 After taking into account exemptions and total itemized deductions, petitioners reported taxable income and an income tax liability of $147,194 and $34,569, respectively, on their 2002 return. The reported income tax liability consists entirely of the tax imposed by section 1. On or about April 21, 2004 (after respondent issued the notice of deficiency), petitioners submitted a Form 6251, Alternative Minimum Tax–-Individuals, for 2002. In computing alternative minimum taxable income (AMTI) of $175,603, petitioners deducted a $27,500 negative tax preference for intangible drilling costs. Petitioners did not claim a deduction for intangible drilling costs in the computation of the taxable income or section 1 income tax liability reported on their return. On the Form 6251, petitioners reported an AMT of $12. On line 43 of their 2002 return, petitioners reported an AMT liability of zero. Discussion The dispute focuses on the negative tax preference item discussed above. According to respondent, petitioners’ AMTPage: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011