Question

# In 2019, Deon and NeNe are married filing jointly. Deon and NeNe’s taxable income is \$1,190,000,...

In 2019, Deon and NeNe are married filing jointly. Deon and NeNe’s taxable income is \$1,190,000, and they itemize their deductions as follows: real property taxes of \$17,700, charitable contributions of \$24,250, and mortgage interest expense of \$48,400 (\$700,000 acquisition debt for home). Use Exhibit 8-5 and Tax Rate Schedule for reference.

rev: 02_29_2020_QC_CS-202942

a. What is Deon and NeNe's AMT?

**** This is incorrect : Taxable Income       1,190,000Less:Charitable contributions            24,250Mortagage Interest Expense            48,400           (72,650)       1,117,350Less:AMT Exemption           111,700AMT base       1,005,650AMT=AMT*26%           261,469*****

Calculating Alternative Minimum Tax

Taxable income = \$1,190,000

Less :

Charitable contribution = \$24,250

Mortgage interest expense = \$48,400

Personal property taxes = \$10,000 (only upto \$10,000 is deductible as per IRS) (Topic 503 of deductible taxes & Topic 501 of limitations)

Alternative Minimum Tax Income = \$1,107,350

(In general we have to deduct the exemption limit of \$111,700 available for Jointly filing married couple, but as the income exceeded \$1 million there will be no AMT exemption)

Alternative Minimum Tax = \$1,107,350 x 28% (higher rate is applicable, not 26%) = \$310,058

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