Question

Problem 6-26
The Individual Alternative Minimum Tax (AMT) (LO 6.9)

Otto and Monica are married taxpayers who file a joint tax return. For the current tax year, they have AGI of $80,300. They have excess depreciation on real estate of $67,500, which must be added back to AGI to arrive at AMTI. The amount of their mortgage interest expense for the year was $25,000, and they made charitable contributions of $7,500. They have no other itemized deductions.

If Otto and Monica's taxable income for the current year is $39,700, determine the amount of their AMTI.

Answer 1

AMT is calculated based on the alternative minimum taxable income (AMTI) that includes all income taxable under the regular tax system plus some income that is tax exempt under the regular tax system. There are also restrictions on claiming itemized deductions, accelerated depreciation, exemptions for dependents, and certain other specialized deductions and credits. After calculating the tax liability under the regular tax system and under the AMT system, the taxpayer pays the greater amount.

Calculation Of AMTI

AGI - $ 80300

Add : Excess Depreciation on Real Estate - $ 67500

Less : Mortgage Interest Expenses - $ 25000

Less : Charitable Contribution - $ 7500

AMTI - $ 115300