The Tax Court looked at two cases involving the Alternative Minimum Tax (AMT) today. In both cases, the taxpayers impacted by the AMT protested that they shouldn’t have been impacted by the AMT because they either didn’t have preference items or that they’re the kind of people who shouldn’t have to pay AMT.
The Tax Court’s response? Tough.
In the first case, the petitioner had just $121,000 of adjusted gross income (AMI), and he ignored the AMT when he completed his tax return. However, the IRS computers found that he owed an additional $4,176 because of AMT. He had no preference items.
However, if you’re “lucky” enough to have a high enough level of AGI (typically over $100,000), and enough itemized deductions (and our lucky taxpayer had over $35,000), you can get hit by the AMT. Petitioners arguments were restricted to the fact that he worked two jobs to support his family and shouldn’t have to pay AMT because Congress didn’t intend for the AMT to impact the nonwealthy working class.
“The unfortunate consequences of the AMT in various circumstances have been litigated since shortly after the adoption of the AMT. In many different contexts, literal application of the AMT has led to a perceived hardship, but challenges based on equity have been uniformly rejected…Congress enacted the AMT and we have no authority to disregard them.”
In the second case, our taxpayers did have a preference item—a $342,000 capital gain. But the AMT was never intended to cover taxpayers in their situation, or so they said.
Wrong.
“We also remind petitioners that this Court has consistently and repeatedly rejected challenges to proposed deficiencies based on the fairness of the alternative minimum tax.”
So yet again the Court saw two cases where the AMT was shown to be unfair. The final score? AMT 2, Honest Taxpayers 0.
I wonder if Congress is aware of the storm that will be unleashed next year if they don’t stop the AMT monster….
Cases: Kamara v. Commissioner, T.C. Summary 2007-103 and Moore v. Commissioner, T.C. Summary 2007-104
Tags: AMT