- 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’ AMT
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