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Respondent computed the AMT in the following manner:
Form 1040, line 39 $18,6311
plus: adjustments and preferences
(1) medical/dental expenses 2,0212
(2) State/local income taxes 32,099
(3) real estate taxes 20,445
alternative minimum taxable income 73,196
less: exemption amount -49,000
taxable excess 24,196
applicable AMT rate 26%
tentative minimum tax 6,291
less: regular tax3 - 963
AMT $ 5,328
1 Line 39 of Form 1040 represents adjusted gross income
less itemized deductions as reported by petitioners on
their return. Line 39 precedes the line on which personal
exemptions are claimed; thus, the AMT
computation effectively serves to disallow all personal
exemptions.
2 Medical expenses in excess of 7.5 percent, but less
than 10 percent, of adjusted gross income as reported by
petitioners on their return.
3 As reported by petitioners on line 55 of their return.
Although respondent’s computation of the AMT in the notice
of deficiency refers to “adjustments and preferences”,
petitioners did not have any “items of tax preference” within the
meaning of that term as defined by section 57.
Petitioners filed a petition challenging respondent’s
deficiency determination. Petitioners contend that the AMT
should not apply to them under the circumstances of their case,
and they ask for a waiver from such tax on equitable grounds. In
this regard, petitioners point out that they had no items of tax
preference in 2002. Petitioners also point out that they are
neither wealthy nor the high-income taxpayers for whom the AMT
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Last modified: May 25, 2011