"Shyster1040" <Shyster1040[at]nospamhotmail.com> wrote:

- quote -

I agree completely - it's primarily about collecting the tax
in the individual case. I've seen the IRS take inconsistent
positions when the position in the individual case would
result in higher taxes. But I've also seen them be very
reasonable in some cases.

Stu

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frank1492 <frank1492[at]verizon.net> writes:

- quote -

No, there wouldn't have been.

Here's the deal -- under the AMT system, state and local
income and property taxes are not deductible, So whether
or not you understate them, your tentative minimum tax (TMT)
will be unchanged. All that understating them will do is
increase your regular tax (RT). Your total tax liability
is MAX(TMT, RT) and the AMT line is MAX(TMT-RT, 0). So
while understating the deductions may reduce the AMT line
to zero, it can never save you money (because doing so leaves
TMT unchanged) and may cost you money (if you manage to boost
RT over TMT).

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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"Bill Brown" <brownwp[at]longwood.edu> wrote:
- quote -

They're all academic except when they involve my clients.

Stu
***********************

Messrs Brown and Bronstein:

I quite agree with both of you, there are no academic tax
cases, particularly when they involve my client.

I believe that was the point of my original comment, namely,
that the IRS was not engaged in a pointless, academic
exercise to score the point that deductions were mandatory,
in a case where the taxpayer's bottom-line tax liability
didn't change as a result, but that there were real dollars
in play, and that the IRS had asserted a substantial
deficiency against the taxpayer on the ground that she had
failed to properly calculate her AMT liability.

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"Bill Brown" <brownwp[at]longwood.edu> wrote:
- quote -

They're all academic except when they involve my clients.

Stu

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I have watched this and other threads with great interest.
For the past two years my income has been unusually large,
due to the sale of shorefront property in a state other than
my home state. Obviously this had tax ramifications in both
states. Being somewhat naive, I went ahead and listed the
large taxes as deductions. My AMT was several thousand
dollars in each year. (None next year I presume as my
income returns to normal levels.) I have already filed my
tax return for this year, and obviously last as well.

I focus on your discussion of whether or not the law says
(or implies) that once you have chosen to itemize, you then
have an obligation to itemize fully. So my first question
is: Do you?

If possible, for example, to understate state taxes, my next
question is under what circumstances would benefit to the
AMT accrue? I currently have a refund of $301. As an
extreme test, using TurboTax, I reduced my state taxes to
zero to see what would happen. The result was an amount due
of over $1300. (My AMT of course went to 0.) Obviously
there was no benefit to omit my state taxes as deductions.

If I looked at various levels of understatement, however,
would there have been some level at which there would have
been benefit to such understatement? If understatement is
allowable, would there have been great benefit to finding
that "critical level" that would have minimized my total
tax? Or would that benefit have been relatively small.

I realize that computation of AMT is complex and you don't
have exact figures, but I'm just looking for a rule of thumb
as well as perhaps some consolation that I haven't paid much
more than I needed to.

Thanks very much for your help! Frank

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"Shyster1040" <Shyster1...[at]nospamhotmail.com> wrote:

- quote -

There are no "academic" tax cases.

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""Bill Brown" <brownwp[at]longwood.edu> wrote:

- quote -

Believe the case NAILA M. QURESHI, Plaintiff-Appellant, v.
UNITED STATES, Defendant-Appellee found at
http://fedcir.gov/opinions/06-5002.pdf
decided September 6,
2006 is the applicable one.
""

If this is, indeed, the case, then the issue wasn't a merely
theoretical one concerning the AMT where the bottom-line tax
liability doesn't change. According to the appellate
court's recitation of the facts, the plaintiff taxpayer
originally claimed a refund of $3,744.01, which the IRS
disallowed in part, allowing the taxpayer a refund of only
$2,334.01.

The reason for the disallowance was that, on audit, the IRS
determined that the taxpayer was subject to the AMT and thus
owed additional taxes (i.e., the excess of the AMT tentative
tax over the regular tax liability) in the amount of $1,410.

In other words, on her return as filed, the taxpayer showed
only a regular tax liability of $6,559, which the IRS
increased to $7,969 on the basis that the taxpayer had
failed to compute her AMT which, when computed, resulted in
an AMT liability of $1,410 that the taxpayer had not
reported on her return as filed.

Thus, the dispute was not purely academic because the impact
of the AMT most definitely increased the taxpayer's tax
liability over what it was solely under the regular tax.

The "I didn't deduct my state/local taxes" issue arose in
the context of the plaintiff taxpayer's claim that she was
not subject to the AMT in the first place because she had
not deducted her state and local income taxes.

In other words, the taxpayer was claiming that deducting
one's state and local taxes was a condition precedent to the
imposition of the AMT.

This is clearly not the case, as the AMT is imposed
regardless of whether or not one deducted one's state and
local taxes. See Code Sec. 55(a) "There is hereby imposed
(in addition to any other tax imposed by this subtitle) a
tax equal to the excess (if any) of - (1) the tentative
minimum tax for the taxable year, over (2) the regular tax
for the taxable year."

Thus, if the case of Qureshi v. U.S. (Fed Cir, 9/06/2006,
No. 06-5002) is in fact the case referred to by the OP, then
the OP misconstrued the case.

It is not about the IRS asserting mandatory deductions for
state and local taxes in an otherwise academic case
concerning the AMT where the imposition of the AMT does not
change the bottom-line tax liability, it is merely a
garden-variety case in which the taxpayer failed to compute
her additional AMT, on the false premise that the failure to
deduct her state and local taxes insulated her from the AMT,
and the IRS properly reduced her claimed refund when it
properly asserted the additional AMT liability against the
taxpayer.

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"Bill Brown" <brownwp[at]longwood.edu> wrote:

- quote -

What the court said was that deductions were irrelevant.
AMT, they said, is simply another way to compute taxes and
has nothing to do with what is included on the regular
return. I guess they mean that the safe harbor amount is
based on the AMT calculation, not on the regular tax
calculation.

- quote -

Right.

Stu

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"Helpful One" <tryingtoh...[at]voyager.net> wrote:
- quote -

Reading the Court of Claims filed case filed by Ms. Qureshi
[2005-2 USTC =B650,586], I don't see a requirement that a
taxpayer take allowed Schedule A deductions. Qureshi simply
didn't show an AMT computation on her 2002 return when she
should have.

Even though the IRS recomputed her regular tax liability by
deducting state and local taxes to recompute regular tax
before computing AMT, this did not change her total tax
liability from what it would have been if the IRS had
ignored her failure to deduct state and local taxes.

Her failure to deduct state and local taxes did not raise
her regular tax enough to get out of owing AMT. If she had
deducted her state and local taxes of $5,158, her total tax
liability would have been the $7,969 arrived at by the IRS.
If her state and local taxes had been zero so her regular
tax liablity as shown on her filed return was correct, then
her total tax liability would still have been $7,969.

In other words, this case did not establish that a taxpayer
must claim all itemized deductions to which he/she is
entitled. That position was not asserted by the IRS and was
not addressed in the case.

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"Bill Brown" <brownwp[at]longwood.edu> wrote:

- quote -

Believe the case NAILA M. QURESHI, Plaintiff-Appellant, v.
UNITED STATES, Defendant-Appellee found at
http://fedcir.gov/opinions/06-5002.pdf decided September 6,
2006 is the applicable one.

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Here is a link to the transcript of the show in question.
http://www.pbs.org/nbr/site/features...axtipsQA_2006/

The question is from Peter of Washington, DC. Unfortunately,
Kevin McCormally doesn't provide the name of the case in his
response.

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- quote -

Underclaiming business deductions on Schedule C could affect
EIC, but underclaiming (state tax) deductions on Schedule A
would have no effect on EIC.

--
Don EA in Upstate NY

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- quote -

Commentator? Interesting.

- quote -

Because underclaiming deductions can result in more EITC
than the IRS believes the taxpayer is entitled to.

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NadCixelsyd wrote:

- quote -

There's got to be more to this case than meets the eye.
Probably other issues were at stake other than AMT. What
was the name of the case?

no law says one has to claim deductions on schedule A. It's
entirely optional. So if none claimed, then none need be
added back for amt.

ChEAr$,
Harlan Lunsford, EA n LA

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On last night's Nightly Business Report, they had a tax tip
talking about evading the AMT by not claiming allowed
deductions. Apparently a taxpayer had intentionally failed
to deduct certain state taxes so that the AMT did not kick
in. What she failed to realize was that she did not save
any money by evading the AMT. But there's more.

The IRS fought (and won) in court to REQUIRE her to claim
the decuctions so that the AMT did kick in. The fact that
there was no increase in tax was not the issue. Now it is
illegal to underreport your income, but it's also illegal to
underreport your deductions.

What the commentator failed to discuss was WHY does the IRS
give a *^&$ if it results in the same (or more) tax. I find
this a bit hard to swallow. Why does the IRS care?

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