114 danica owned a car that she used exclusively for

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114. Danica owned a car that she used exclusively for business. The car was purchased in 2008 and sold in 2010 for a recognized gain of $5,000. However, the sale resulted in no AMT. Why? The car is classified as personalty used in a business. Since it was placed in service by Danica after December 31, 1998, the depreciation for AMT and regular income tax purposes can be the same (150% declining-balance method). Under this assumption, there was no annual AMT adjustment for depreciation and no AMT adjustment is necessary on the sale of the car (the adjusted basis for AMT and regular income tax purposes is the same). 115. What effect do deductible gambling losses for regular income tax purposes have in calculating AMTI? The amount allowable in calculating the gambling loss deduction under the regular income tax is the same as that for AMTI purposes. So no adjustment is required in converting regular taxable income to AMTI. 116. Why is there no AMT adjustment for charitable contributions? The charitable contribution deduction for AMT purposes is the same as the charitable contribution deduction for regular income tax purposes. 117. Is it possible that no AMT adjustment is necessary for medical expenses in calculating AMTI even though the floor limitation is different (7.5% of AGI for regular income tax compared to 10% for AMT purposes)? Yes, this occurs when medical expenses are not large enough to exceed either floor. Since the medical expense deduction for both purposes is $0, there is no AMT adjustment. 118. When qualified residence interest exceeds qualified housing interest, the positive adjustment required in calculating AMT is a timing adjustment. That is, in the future, there will be an offsetting negative adjustment. Comment on the validity of this statement. This AMT adjustment is not a timing adjustment. So it will not reverse. 25
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119. Andrea, who is single, has a personal exemption deduction in calculating her 2010 taxable income. She has no dependency deductions. What is the amount of the AMT adjustment in calculating AMTI? In calculating Andrea’s 2010 taxable income, she deducts $3,650 for her personal exemption deduction. So in calculating her AMTI, she has a positive adjustment of $3,650. 120. How can interest on a private activity bond issued in 2008 result in both an AMT adjustment that decreases AMTI and an AMT preference that increases AMTI? The interest on a private activity bond issued in 2008 is not included in taxable income, but the interest (net of related expenses) is a tax preference that increases AMTI. For regular income tax purposes, the interest on a private activity bond is not included in net investment income in calculating the deduction for investment interest. However, for AMT purposes such interest is included in net investment income in calculating the deduction for investment interest. To the extent that such private activity bond interest increases the amount of the investment interest deduction for AMT purposes, therefore, it is a negative AMT adjustment.
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  • Spring '12
  • honig
  • Taxation in the United States, regular income tax

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