T.C. Memo. 2002-196
UNITED STATES TAX COURT
LAWRENCE MOORE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7591-01. Filed August 7, 2002.
Lawrence Moore, pro se.
Michelle M. Lippert, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
DEAN, Special Trial Judge: Respondent determined a
deficiency in petitioner's Federal income tax of $4,233 for 1999.
The only issue for decision is whether petitioner is liable
for the alternative minimum tax.
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FINDINGS OF FACT
Petitioner resided in Toledo, Ohio, at the time the petition
in this case was filed.
Petitioner timely filed his 1999 Federal income tax return.
Attached to the return was a Form W-2, Wage and Tax Statement,
from "Four-A Electric, Inc." reporting wages to petitioner of
$54,819. Petitioner reported the amount of his wages on line 7
of the return. On Schedule A, Itemized Deductions, of his
return, petitioner claimed deductions for State and local taxes
of $4,999, and charitable contributions of $100. He also claimed
on Schedule A miscellaneous itemized deductions for unreimbursed
employee expenses of $39,224, after reduction for the 2-percent
floor of section 67.1
From adjusted gross income of $55,207, petitioner deducted
total itemized deductions of $44,323, and a personal exemption of
$2,750, to arrive at taxable income of $8,134 on which he
computed a tax due of $1,219. As petitioner had total
withholding credits of $6,197, he claimed an overpayment of
$4,978. Petitioner did not attach Form 6251, Alternative Minimum
Tax-Individuals, to his 1999 income tax return, or report any
liability for the alternative minimum tax on line 51 of Form
1040, U.S. Individual Income Tax Return.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
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The Commissioner sent petitioner a notice of deficiency
dated March 30, 2001, stating his determination that petitioner
is liable for the alternative minimum tax prescribed by section
55 in the amount of $4,233.
OPINION
Since 1969, the Internal Revenue Code has included minimum
tax provisions for both corporate and individual taxpayers. Tax
Reform Act of 1969 (TRA 1969), Pub. L. 91-172, 83 Stat. 487.
Congress enacted the minimum tax to prevent corporate and
individual taxpayers from aggregating deductions to the point
where they pay either no tax or a "shockingly low" tax. First
Chicago Corp. v. Commissioner, 842 F.2d 180, 181 (7th Cir. 1988),
affg. 88 T.C. 663 (1987). Section 301 of the TRA 1969, 83 Stat.
580, imposed a minimum tax on certain tax preference items to be
added on to a taxpayer's other tax liability. The provisions
remained in effect, with only minor changes, as the only minimum
tax formulation in the Internal Revenue Code until 1978. See
Revenue Act of 1978, Pub. L. 95-600, sec. 421(a), 92 Stat. 2871;
First Chicago Corp. v. Commissioner, supra; Day v. Commissioner,
108 T.C. 11 (1997).
The Revenue Act of 1978 was supposed to repeal the add-on
minimum tax for individuals and replace it with a new alternative
minimum tax (AMT) beginning in 1979. Other sources indicate,
however, that the two provisions co-existed in the Internal
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Revenue Code until the add-on minimum tax was finally repealed by
the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA),
Pub. L. 97-248, sec. 201(a), 96 Stat. 411, and supplanted by an
amended alternative minimum tax. E.I. du Pont de Nemours & Co.
v. Commissioner, 102 T.C. 1, 18 n.10, affd. 41 F.3d 130 (3d Cir.
1994), and affd. sub nom. Conoco, Inc. v. Commissioner, 42 F.3d
972 (5th Cir. 1995); United States v. Deckelbaum, 784 F. Supp.
1206, 1208 (D. Md. 1992). This TEFRA AMT provision remained in
effect from 1982 until its amendment by the Tax Reform Act of
1986, Pub. L. 99-514, sec. 701, 100 Stat. 2320, which expanded
the AMT for individuals. See S. Rept. 99-313 (1986), 1986-3 C.B.
(Vol. 3) 515, 521.
The post-1986 AMT rules, sections 55-59, were enacted to
establish a floor for tax liability, so that a taxpayer will pay
some tax regardless of the tax breaks otherwise available to him
under the regular income tax rules. See S. Rept. 99-313, supra,
1986-3 C.B. (Vol. 3) at 518. The AMT rules accomplish this goal
by eliminating favorable treatment given to certain items for
purposes of the regular income tax. Secs. 55(b)(2), 56, 57, 58.
The AMT is paid only if, and to the extent that, it exceeds
the taxpayer's regular income tax. Sec. 55(a). The starting
point in computing AMT liability is determining the "alternative
minimum taxable income" (AMTI). AMTI is computed in the same
manner as regular taxable income except that the adjustments
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provided in sections 56 and 58 are taken into account for AMTI,
and the tax preference items set forth in section 57 are not
permitted to reduce AMTI. Sec. 55(b)(2). To determine the
taxable amount of AMTI, the AMTI is reduced by an exemption
amount, which in this case is $33,750, subject to a gradual
phase-out of the exemption amount as AMTI exceeds $112,500. Sec.
55(d)(1), (3). The AMT rate is then applied to AMTI, as reduced
by the exemption amount. Sec. 55(b). For the taxable year at
issue in this case, the applicable AMT rate is 26 percent. The
figure resulting from the application of the AMT rate to the AMTI
is the tentative minimum tax (TMT).
Next, the regular income tax is compared to TMT. If TMT is
greater than the regular income tax, the TMT is the final tax
liability for the taxable year. Sec. 55(a).
In petitioner's case,2 the regular income tax is $1,219, the
amount petitioner reported on lines 40 and 49 of his Form 1040.
Pursuant to section 55(a), the AMT is the difference between the
tentative minimum tax and the regular tax. The TMT is 26 percent
of the excess of petitioner's AMTI over his exemption amount of
$33,750. See sec. 55(b)(1)(A)(i)(I). As petitioner had no items
of tax preference in 1997, AMTI here means petitioner's taxable
income determined with the adjustments provided in section 56.
2
There are no factual issues in dispute that are relevant to
ascertaining the tax liability of petitioner in this case and the
Court therefore finds sec. 7491(a) to be inapplicable.
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Petitioner reads the flush language following section
55(b)(2)(B) to mean that no adjustments provided by section 56
may be made to his taxable income to determine AMTI. The flush
language states that if a taxpayer is subject to the regular tax,
he is subject to the AMT, and if the regular tax is determined by
reference to an amount other than taxable income, such amount
shall be treated as taxable income for AMT purposes. Petitioner
argues that the flush language means that the AMT tax rate can
only be applied to his regular taxable income. Petitioner
misunderstands the operation of the AMT. It is a tax not on
taxable income but on "alternative minimum taxable income" in
excess of the exemption amount. Sec. 55(b)(1); Ellison v.
Commissioner, T.C. Memo. 1995-427 (AMTI of individuals includes
taxable income plus State and local taxes, personal exemptions,
and miscellaneous itemized deductions). And to determine AMTI
the statute requires the taxpayer to make adjustments to taxable
income to compute alternative minimum taxable income. Sec.
55(b)(2)(A) and (B); Holly v. Commissioner, T.C. Memo. 1998-55
(AMTI included taxable income plus personal exemption,
miscellaneous deductions, and State taxes); Ellison v.
Commissioner, supra.
Petitioner's taxable income for 1999 was $8,134.05, the
amount reported on line 39 of Form 1040. As relevant herein, the
adjustments required by section 55(b)(2) as provided in section
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56(b) are threefold. First, section 56(b)(1)(A)(i) provides that
no deduction shall be allowed for "any miscellaneous itemized
deduction (as defined in section 67(b))". Second, section
56(b)(1)(A)(ii) states that no itemized deduction for State and
local taxes shall be allowed in computing alternative minimum
taxable income. Third, section 56(b)(1)(E) states that no
personal exemptions shall be allowed in computing AMTI.
The effect of section 56(b)(1)(A)(i), (ii), and (b)(1)(E) is
to increase petitioner's taxable income amount by: (1) $39,224,
the amount claimed on petitioner's Schedule A as miscellaneous
deductions for unreimbursed employee expenses; (2) $4,999, the
amount claimed on petitioner's Schedule A for State and local
taxes; and (3) $2,750, the amount claimed on petitioner's Form
1040 for a personal exemption.
After taking into account the foregoing three adjustments,
petitioner's AMTI for 1999 is $54,719. Petitioner's AMTI exceeds
the applicable exemption amount of $33,750 by $20,969. See sec.
55(d)(1)(A)(i). Petitioner's tentative minimum tax is therefore
26 percent of that excess, or $5,452. See sec.
55(b)(1)(A)(i)(I). Because petitioner's TMT exceeds petitioner's
regular tax of $1,219, petitioner is liable for the alternative
minimum tax in the amount of such excess, $5,452 less $1,219, or
$4,233.
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Accordingly, we sustain respondent’s determination that
there is a deficiency in petitioner's income tax for the year
1999.
The Court has considered all other arguments advanced by
petitioner, and to the extent not discussed above, has found
those arguments to be irrelevant or without merit.
To reflect the foregoing,
Decision will be entered
for respondent.