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expenses exceed 10 percent of the taxpayer’s adjusted gross
income. Third, section 56(b)(1)(E) provides that no personal
exemptions shall be allowed in computing alternative minimum
taxable income.5
The effect of section 56(b)(1)(A)(ii), (b)(1)(B), and
(b)(1)(E) is to increase petitioners’ taxable income by: (1)
$52,544, the amount claimed by petitioners on their Schedule A
for State and local income taxes ($32,099) and real estate taxes
($20,445); (2) $2,021, the amount claimed by petitioners on their
Schedule A for medical and dental expenses that exceeded 7.5
percent but not 10 percent of their adjusted gross income; and
(3) $9,000, the amount claimed by petitioners on their Form 1040
for the value of three personal exemptions. The total of these
three adjustments is $63,565.
After taking into account the foregoing three adjustments,
petitioners’ alternative minimum taxable income for 2002 equals
$73,196; i.e., taxable income of $9,631 plus adjustments of
$63,565. Alternative minimum taxable income exceeds the
5 Respondent’s computation in the notice of deficiency of
alternative minimum taxable income shortcuts the statutory
formula. Thus, respondent’s computation begins with petitioners’
adjusted gross income less Schedule A itemized deductions, i.e.,
$18,631, thereby ignoring personal exemptions. However,
respondent compensates for this omission by not including
personal exemptions within “adjustments and preferences”.
Respondent’s computation therefore yields the same amount of
alternative minimum taxable income as does the statutory formula;
i.e., $73,196.
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