T.C. Summary Opinion 2001-123
UNITED STATES TAX COURT
ROLLY J. AND JOANN M. SORRENTINO, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3288-00S. Filed August 8, 2001.
Rolly J. Sorrentino, pro se.
Randall L. Preheim, for respondent.
COUVILLION, Special Trial Judge: This case was heard
pursuant to section 7463 in effect when the petition was filed.1
The decision to be entered is not reviewable by any other court,
and this opinion should not be cited as authority.
Respondent determined a deficiency of $3,626 in petitioners'
1995 Federal income tax.
1
Unless otherwise indicated, section references
hereafter are to the Internal Revenue Code in effect for the year
at issue.
- 2 -
The sole issue for decision is whether petitioners are
liable for the alternative minimum tax (AMT) under section 55.2
Some of the facts were stipulated. Those facts and the
accompanying exhibits are so found and are incorporated herein by
reference. Petitioners' legal residence at the time the petition
was filed was Wheat Ridge, Colorado.
Petitioners filed a joint Federal income tax return for 1995
on which they reported taxable income of $27,267, based on the
following gross income items:
Wages and salaries $81,644
Taxable interest income 520
Dividend income 27
Schedule E real estate loss (11,422)
Unemployment compensation 4,025
Nonemployee compensation 5,156
Total income $79,950
Petitioners' return included a Schedule A, Itemized Deductions,
in which they claimed itemized deductions for the following:
2
The deficiency includes self-employment tax under sec.
1401(a) on self-employment income of $5,156 that petitioners
reported as nonemployee compensation on their 1995 return but for
which they paid no self-employment tax. Petitioners conceded
this issue at trial. Another adjustment in the notice of
deficiency disallowed petitioners' child care credit under sec.
24 in the amount of $901 because of respondent's determination
that petitioners were liable for the alternative minimum tax
(AMT). See sec. 24(d)(2). This adjustment will be resolved by
the Court's holding on the AMT issue.
- 3 -
State and local taxes paid $ 6,033
Home mortgage interest 4,062
Charitable contributions 4,077
Job expenses and other miscellaneous deductions
(in excess of 2% of adjusted gross income) 21,511
Total itemized deductions $35,683
Petitioners' tax, prior to credits, was $4,091. Respondent made
no adjustments to either the income or the itemized deductions on
petitioners' return. Petitioners' return also included a Form
6251, Alternative Minimum Tax–-Individuals (the form), which
reflected zero alternative minimum tax. Respondent determined
that petitioners were liable for the AMT.
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
so much of the taxable excess as does not exceed $175,000. See
sec. 55(b)(1)(A)(i). The taxable excess is that amount by which
the alternative minimum taxable income (AMTI) exceeds the
exemption amount. See sec. 55(b)(1)(A)(ii). 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
determined with the adjustments provided in section 56. See sec.
55(b)(2). In calculating AMTI, no deduction is allowed for
miscellaneous itemized deductions or for State and local taxes
paid, unless such amounts are deductible in determining adjusted
- 4 -
gross income. See sec. 56(b)(1). Also, no deduction for
personal exemptions under section 151 is allowed. See sec.
56(b)(1)(E).
Petitioners incorrectly completed the form submitted with
their return in calculating their liability for AMT. On part III
of the form, petitioners correctly listed their exemption amount
as $45,000 on line 22. On line 23 (which subtracts the exemption
amount from the AMTI, line 21), petitioners listed $28,873, which
respondent corrected to $24,811, an adjustment that favors
petitioners. Line 24 then provides the following directions: "If
line 23 is $175,000 or less ($87,500 or less if married filing
separately), multiply line 23 by 26% (.26). Otherwise, multiply
line 23 by 28% (.28) and subtract $3,500 ($l,750 if married
filing separately) from the result". Petitioners calculated the
entry for line 24 on the basis of the second sentence recited
above in which they multiplied the amount on line 23 by 28
percent, from which they subtracted $3,500. The resulting
amount, which they listed on line 24, was less than their tax
liability of $4,091 shown on their Form 1040, U.S. Individual
Income Tax Return. Thus, since the tentative minimum tax was
less than the tax shown on Form 1040, petitioners entered -0- on
line 28, AMT. In the notice of deficiency, respondent calculated
the AMT as 26 percent of line 23 without a reduction of $3,500.
This resulted in an amount on line 24 that exceeded the tax shown
- 5 -
on petitioners' Form 1040, and this excess constitutes the AMT
determined in the notice of deficiency.
At trial, Rolly J. Sorrentino (petitioner) contended that
line 24 of the form is ambiguous as well as the instructions for
calculation of the amounts for that line.
The Court disagrees with petitioner. Section
55(b)(1)(A)(i)(I) and (II) provides, in pertinent part, that the
amount of the AMT in the case of noncorporate taxpayers is the
sum of:
(I) 26 percent of so much of the taxable excess as does
not exceed $175,000, plus
(II) 28 percent of so much of the taxable excess as
exceeds $175,000.
Since petitioners' taxable excess was $24,811, which is
considerably less than $175,000, the directions for line 24 of
the form in clear terms stated that petitioners' entry on line 24
should have been 26 percent of $24,811, and the $3,500 to be
subtracted from the resulting calculation only applied if
petitioners' taxable excess had been $175,000 or more. The Court
finds no ambiguity as to this entry or the basis upon which the
computation was to be made as directed on line 24 of the form.
Petitioners, therefore, erred in making their computation for the
entry on line 24.
- 6 -
Petitioners further contend they relied on the instructions
the Commissioner issued for the form. The portion of the
instructions petitioners rely on states:
General Instructions
Purpose of Form
The tax laws give special treatment to some types of income
and allow special deductions for some types of expenses.
These laws enable some taxpayers with substantial economic
income to significantly reduce their regular tax. The
purpose of the alternative minimum tax (AMT) is to ensure
that these taxpayers pay a minimum amount of tax on their
economic income. Use Form 6251 to figure the amount, if
any, of your AMT.
Petitioner argued that he and his spouse did not have substantial
economic income, and, therefore, the AMT was not intended to
apply to them. While there may be differences of opinion as to
what constitutes substantial economic income, the short answer to
petitioners' argument is that whatever amounts result from the
computations provided for by the statute, those amounts
constitute the AMT. Whether that amount is inequitable is a
matter more appropriately left for congressional resolution.
Benci-Woodward v. Commissioner, 219 F.3d 941 (9th Cir. 2000),
affg. T.C. Memo. 1998-395. Moreover, even if instructions are
incorrect or misleading, the Commissioner is not bound by
guidance he provides to assist taxpayers in filing tax returns
where such guidance is contrary to the law. Dixon v. United
- 7 -
States, 381 U.S. 68 (1965); Automobile Club v. Commissioner, 353
U.S. 180 (1957).
The Court, therefore, sustains respondent.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.