T.C. Memo. 1999-87
UNITED STATES TAX COURT
GEORGE AND JOAN PROSMAN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 26560-96. Filed March 23, 1999.
George Prosman, pro se.
Ronald F. Hood, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GOLDBERG, Special Trial Judge: This case was heard pursuant
to the provisions of section 7443A(b)(3) and Rules 180, 181, and
182. All section references are to the Internal Revenue Code in
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
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Respondent determined a deficiency in petitioners' Federal
income tax for 1995 in the amount of $2,688. The issue for
decision is whether petitioners are subject to the alternative
minimum tax (AMT) under section 55.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioners resided in
Webster, New York, at the time their petition was filed.
References to petitioner are to George Prosman.
FINDINGS OF FACT
During the year in issue, petitioner was employed as a
computer consultant by Command Systems, Inc. (Command Systems).
As a consultant, petitioner bid on different projects using a
formula which included both a standard hourly base rate and a
"per diem allowance" amount. Petitioner included a "per diem
allowance" amount in his bid formula because most of his projects
were out of town and petitioner incurred substantial meal and
lodging expenses while away from home.
Accordingly, petitioner requested that Command Systems
separate petitioner's "per diem allowance" amount, which
petitioner used to pay for employee business expenses, from his
base rate. Command Systems refused and included both amounts as
wages on petitioner's 1995 Form W-2.
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On their Federal income tax return for 1995, petitioners
reported adjusted gross income (AGI) in the amount of $83,143.1
On Schedule A of their 1995 return, petitioners claimed, among
other deductions, the following itemized deductions:
Expense Amount
Taxes paid $8,824.82
Job expenses and other miscellaneous
deductions, above the 2-percent floor 28,589.632
Total 37,414.45
For 1995, petitioners reported income prior to the deduction for
exemptions of $37,843, taxable income of $32,843, and total tax
of $4,924. There is no dispute that petitioners incurred
expenses as claimed on their 1995 return.
In the notice of deficiency, respondent determined that
petitioners were subject to the AMT for the tax year in issue.
Respondent computed an AMT in the amount of $7,612 for
petitioners' 1995 tax year, and determined a deficiency in
petitioners' tax in the amount of $2,688.
OPINION
Petitioners contend that respondent's application of section
55 is inequitable.
1
This amount includes $982 in "Taxable refunds, credits, or
offsets of state and local income taxes".
2
This amount consists of unreimbursed employee business
expenses incurred by petitioner while working for Command
Systems.
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Section 55(a) imposes a tax equal to the excess of the
tentative minimum tax over the regular tax. The tentative
minimum tax for noncorporate taxpayers is equal to 26 percent of
the amount (the taxable excess), as does not exceed $175,000, by
which the alternative minimum taxable income (AMTI) exceeds the
exemption amount, plus 28 percent of such taxable excess as
exceeds $175,000. See sec. 55(b)(1)(A). The exemption amount
for married couples filing a joint return is $45,000. See sec.
55(d).
AMTI equals the taxpayer's taxable income for the year with
the adjustments provided in sections 56 and 58 and increased by
the amount of tax preference items described in section 57. See
sec. 55(b)(2). In calculating AMTI, no deduction is allowed for
miscellaneous itemized deductions and State and local taxes paid,
unless such amounts are deductible in determining AGI. See sec.
56(b)(1). Also, no deduction for personal exemptions under
section 151 is allowed. See sec. 56(b)(1)(E).
In computing petitioners' AMTI for the year in issue,
respondent disallowed petitioners' deductions for taxes paid and
for job expenses and other miscellaneous itemized deductions. We
have reviewed respondent's computations of the AMT and find that
they comport with the provisions of sections 55 and 56.
Petitioners, however, contend that the AMT was intended to
apply to high income earners rather than to lower income
taxpayers, such as themselves. Petitioners contend that if
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Command Systems had separated petitioner's "per diem allowance"
amount from petitioner's base rate, petitioner would not have
been subject to the AMT. We are not persuaded by petitioners'
argument.
While we may sympathize with petitioners, under the plain
meaning of the statute they are subject to the AMT. Furthermore,
this Court has considered and rejected equitable arguments like
those of petitioners. See Huntsberry v. Commissioner, 83 T.C.
742, 747-753 (1984); Holly v. Commissioner, T.C. Memo. 1998-55.
Petitioner may be correct in asserting that the AMT would
not apply if Command Systems had designated certain amounts paid
to petitioner as reimbursed employee business expenses rather
than as wages. Petitioner, however, negotiated the best contract
that he could, and his remuneration must be taxed based on the
manner in which it was received. Respondent's determination is
sustained.
To reflect the foregoing,
Decision will be entered
for respondent.