"bc" <cantor2[at]ix.netcom.com> wrote:

- quote -

We started the same type analysis because our software, CCH
Prosystem, provided a scan for the clients in the three
prior years that might possibly be affected. We ran all the
possible clients in 2002 and 2003 and preliminarily
concluded that none would be ultimately affected.

Initially, we struggled trying to understand the actual
provision because there was not much attention (or
discussion) given to it. We still have to check the 2001
tax year. We have also sought a specialist's interpretation
to confirm our reading. If it is any comfort, it appears
that we went through a similar analysis as you; however, you
probably took it one step further, and it has currently been
put on the back burner for us. We do need to re-visit it.

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bc wrote:

- quote -

Haven't thought about it. (AMT is rarely a significant
problem in my "no income tax" state.)

But, I'm not surprised at Lacerte's response. At some point,
most software developers "freeze" the prior year release
(for better or worse) and move on to the current year
product.

MTW

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This should be fun. <g
WFTRA included technical corrections to a variety of previous acts.
One of the corrected acts was the Taxpayer Relief Act of
1997. Specifically, there was a technical correction to the
language regarding the integration of the reduced capital
gains tax and the calculation of AMT.

As I understand it, this correction only impacts taxpayers
whose capital gains are taxed (at least partly) in the lower
two brackets and have AMT liability.

The explanatory blurbs put out after TRA '97 were that
capital gains would be taxed at the same rates for both AMT
and regular tax calculation. It turns out the law actually
said the capital gains will be taxed at the lower rates to
the extent of the lesser of (i) the amount of adjusted net
capital gain taxed at the 5% rate under regular tax or (ii)
the taxable excess.

The amendment changed the AMT calculation so the capital
gains taxed at the lowest rate would be the lesser of (i)
taxable excess, (ii) adjusted net capital gains, or (iii)
the excess of the maximum amount taxed at the lowest two
brackets under regular tax over the ordinary taxable income.

An example: married couple, no dependents in 2003. Wages
$32,100; long-term capital gain $82,000; itemized deductions
consisting entirely of state and local taxes and
miscellaneous itemized deductions of $73,000. Regular tax
taxable income is $35,000 (32,100 + 82,000 - 73,000 -
6,100). For alternative minimum tax purposes, the taxable
excess is $56,100 (32,100 + 82,000 - 58,000).

Under prior law, the 5% bracket gets $35,000 (lesser of
taxable income, adjusted net capital gain, or the excess of
amounts taxes at 10% and 15% over ordinary taxable income).
Thus, the regular tax is $1,750.

Under prior law, The same $35,000 would be taxed at 5% for
AMT as the lesser of (i) amount taxed at 5% for regular tax
or (ii) taxable excess. The remaining taxable excess of
$21,100 (56,100 - 35,000) is taxed at 15%. Total tentative
minimum tax $4,915.

Under the law as amended, $56,100 is taxed at 5% as the
lesser of (i) taxable excess, (ii) adjusted net capital
gain, or (iii) excess of the maximum amount taxed at the 10%
and 15% rates under regular tax over ordinary taxable
income. Thus, the tentative minimum tax is $2,905.

Anyone still reading? I'm surprised.

I asked Lacerte if they were going to change their program to
accommodate the change. Their reply:

"No change was made to the AMT calculation based on WFTRA
'04. We followed the law as it was written previously, as
well as how it was reflected on the 6251 form and
instructions. There are no plans to revise the '03 Lacerte
Tax and prior programs. The AMT tax will need to be
overridden in computing the amended return."

I translate this as "we followed what the prior law said. We
aren't amending our programs. If you want to amend,
calculate AMT manually."

We then searched for clients impacted in 2003 by this change
(which we understand to be retroactive). We found one which
"fits". Before we amend (and search our 2002 clients) we
wanted to check if anyone else has noticed (or even thought
about) this.

--
Bruce Davidson Cantor, CPA, JD
Admitted in Colorado

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