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 Topic: R2- Please help me in this question ( Topic Closed)
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osama yasin
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| Posted: 24 Jul 2012 at 10:03 | IP Logged
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dougefresh
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| Posted: 26 Jul 2012 at 06:15 | IP Logged
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For AMT:
Medical deductions are subject to a 10% AGI floor (as
opposed to 7.5% for regular tax). So 10% of 100K= $10K
floor. $12K medical - $10K floor = $2,000 Medical
allowed for AMT.
Qualified Mortgage Interest is allowed as an adjustment
for AMT (if used to buy, build or improve home is OK). So
if it's NOT a home equity loan (ok for regular tax but
not AMT) it's fine. Thus, the $5000 Home Equity Interest
is NOT allowed for AMT (but okay for regular tax).
Remember there are 2 forms of mortgage interest: 1) Used
to buy, build, or improve a home (up to $1,000,000 of
aquisition indebtedness) and 2) Home Equity Loan (Up to
$100,000, not to exceed equity in home). Interest on
both 1&2 are fine for regular tax (as a deduction), but
only #1 is ok for the AMT deduction.
Remember: "PANIC TIMME" mnemonic:
T= Tax Deductions (not allowed for AMT). So no
State or RE taxes allowed as a deduction as stated in
solution.
Charity is allowed under both regular tax as well as AMT.
See p. R2-52 in the 2012 Becker Book.
So we have $2000 medical (after 10% AGI floor for "AMT"
for medical) + $10,000 Mortgage interest (Aquisition
indebtedness) + $5,000 Charity = $17,000 AMT
deductions allowable for AMT.
Hope that helps!
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osama yasin
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| Posted: 26 Jul 2012 at 07:22 | IP Logged
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Thank you so much. really you give me an excellent explenation.
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osama yasin
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| Posted: 26 Jul 2012 at 07:29 | IP Logged
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Can you explain this please. ' charity is not add back for AMT ??
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dougefresh
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| Posted: 26 Jul 2012 at 08:04 | IP Logged
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You're welcome. It means that it is allowed as a
deduction for AMT. That is, it is not an "add back."
Certain items are "add backs" for AMT, like taxes, and
home equity loan interest as mentioned above.
Also keep in mind that the charitable deduction (for
individuals) is limited:
Overall Limit = 50% AGI
1) Cash - May be all 50%
2) General Propery- Lessor of basis or FMV (property held
less than 1 year)
3) Long-term appreciated property (held 1yr or more) is
limited to the LESSOR of:
a) 30% of AGI <or>
b) The remaining amount to reach 50% after cash
contributions
For example. Assume AGI is $100,000.
example for 1) You could donate $50,000 cash.
example for 2) Bought stock 4 months ago for $2,000, FMV
is now $10,000.... you only get $2,000 for the deduction
(because property held less than one year)
example 3) Bought stock 2 years ago for $10,000, and now
worth 40,000. You'd normally be able to deduct $40,000
for a charitable deduction, but here you are limited to
30% (LT appreciated property) or $30,000. However, you
could still donate an additional $20,000 in case to reach
a total of $50,000 or 50% of AGI
Keep in mind it is different for corporations, which have
the charitable contribution deduction limited to 10% of
taxable income.
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