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lolly84
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Newbie

Joined: 26 Jan 2009
Location: United States
Online Status: Offline
Posts: 27

Posted: 07 Jul 2009 at 00:51 \| IP Logged

Robert had current-year adjusted gross income of
$100,000 and potential itemized deductions as follows:

- Medical expenses (before pecentage limitation) $12,000
- State income taxes $4,000
- Real estate taxes $3,500
- Qualified housing and residence mortgage interest
$10,000
- Home equity mortgage interest (used to consolidate
personal debts) $4,500
Charitable contributions (cash) $5000

What are Robert's itemized deductions for AMT?

Answer:
Medical expenses $2,000
State income taxes: Not allowed
Real estate taxes: Not allowed
Qualified housing and residence interest: Not allowed
Home equity mortgage interest (not used to buy, build, or improve the home): Must be added back
Charitable contributions: Not allowed

They added:
Medical expenses, Qualified housing and residence interest, Charitable contributions back
2000+10,000+5000 = 17,000

Help: I thought the qualified housing interest and CC are not allowed in computing AMT according to Becker review. Also, shouldn't the Home equity interest be added back?

Could someone please help me here.

caixinran
Regular
Regular

Joined: 10 Jun 2009
Online Status: Offline
Posts: 159

Posted: 07 Jul 2009 at 15:51 \| IP Logged

""qualified housing interest and CC are not allowed in
computing AMT according to ""

There are two kind of interests on SCH A:

1) Mortgage interests relate to property/House
purchase/acquisition. called interests due to the
property acquisition indebtedness. Those amount does not
to be adjusted when computed AMTI.

2) Home Equity Indebetedness is different. It depends on
the purpose/use of the money. If you use the money to
improve the home/property, you can use the interests for
both Regular taxable income and AMTI. However, if you use
the money for personal use, you have to adjust it when
you calculate the AMTI. (You can still use it to
calculate to Regular Taxable Income).

Please correct me if I am wrong. Thanks!

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lolly84
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Newbie

Joined: 26 Jan 2009
Location: United States
Online Status: Offline
Posts: 27

Posted: 08 Jul 2009 at 00:14 \| IP Logged

Thanks caixinran,

So if qualified housing interest and CC are not allowed in computing AMT, why were they added in?

kj_nyc
Major Contributor

Joined: 05 Jun 2009
Location: United States
Online Status: Offline
Posts: 1145

Posted: 08 Jul 2009 at 10:34 \| IP Logged

charitable contributions are allowed in computing AMT. I don't know where you are getting that they are not? I believe the only case when there would be an adjustment for charitable contributions for AMT vs regular tax is if the taxpayer contributed appreciated property, did not elect to take a deduction for the FMV of the property contributed, and had a different basis in the property for AMT vs regular tax.

kj_nyc
Major Contributor

Joined: 05 Jun 2009
Location: United States
Online Status: Offline
Posts: 1145

Posted: 08 Jul 2009 at 10:41 \| IP Logged

Oh, for corporations, if the deduction for charitable contributions is limited due to the 10% of taxable income ceiling, the allowed charitable contribution deduction for AMT might be different because for AMT, you look at % of AMTI not regular taxable income. But it's N/A in this problem because we're talking about an individual.

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