Jonathan N. and Kimberly A. Palahnuk - Page 5

                                         -5-                                          
          2001.  Petitioners calculated their 2001 AMTI on 2001 Form 6251,            
          Alternative Minimum Tax--Individuals, by reporting a negative               
          $1,929,509 adjustment on line 9 of that form and by reporting two           
          other unrelated adjustments in the total amount of $5,999.4  They           
          reported that their AMTI was negative $1,362,349 (taxable income            
          of $561,161 + negative $1,929,509 + $5,999) and that their 2001             
          tentative minimum tax and 2001 AMT were both zero.  For 2000,               
          petitioners’ AMT equaled $588,066.  Petitioners adjusted that               
          amount by $46,553 to reflect a net minimum tax on exclusion items           
          and claimed on their 2001 return that they had a $541,513 minimum           
          tax credit that could be applied to 2001 and later years.                   
          Petitioners applied $191,457 of this credit to their 2001 regular           
          tax liability of $191,457, thus reducing that liability to zero,            
          and claimed the $350,056 balance as a minimum tax carryover to              
          2002.                                                                       
               Respondent determined that petitioners were not entitled to            
          the negative $1,929,509 adjustment.  Accordingly, respondent                
          determined, petitioners’ 2001 AMTI was $567,160 (negative                   
          $1,362,349 + $1,929,509) and their resulting 2001 tentative                 
          minimum tax was $155,305.  Further, respondent determined,                  


               4 We are unsure of the specifics of the negative $1,929,509            
          adjustment.  Petitioners claim in their posttrial brief that they           
          are entitled to a negative adjustment of $2,086,009, or in other            
          words, the difference (as rounded) between the 2001 regular tax             
          capital gain of $148,461 and the 2001 AMT capital loss of                   
          $1,937,547.                                                                 





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