T.C. Summary Opinion 2003-159
UNITED STATES TAX COURT
AARON DOUGLAS LAW, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16498-02S. Filed October 27, 2003.
Aaron Douglas Law, pro se.
Dustin M. Starbuck, 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.
1
Unless otherwise indicated, section references
hereafter are to the Internal Revenue Code in effect for the year
at issue. All Rule references are to the Tax Court Rules of
Practice and Procedure.
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Respondent determined a deficiency of $7,267 in petitioner's
2000 Federal income tax.
The sole issue for decision is whether petitioner is liable
for the alternative minimum tax (AMT) under section 55.
Some of the facts were stipulated. Those facts and the
accompanying exhibits are so found and are incorporated herein by
reference. Petitioner's legal residence at the time the petition
was filed was Hot Springs, Virginia.
Petitioner filed a Federal income tax return for 2000
reporting the following gross income items:
Wages and salaries $43,953.68
Taxable interest income 44.14
Dividend income 1,186.75
Taxable refunds 759.43
Taxable IRA distributions 16,714.78
Total income $62,658.78
Petitioner's return included a Schedule A, Itemized Deductions,
in which he claimed itemized deductions for the following:
State and local taxes paid $ 2,115.52
Charitable contributions 200.00
Job expenses and other miscellaneous deductions
(in excess of 2% of adjusted gross income) 59,197.20
Total itemized deductions $61,512.72
After deducting the itemized deductions, petitioner's remaining
income of $1,146.06 was offset by the $2,800 personal exemption.
Thus, petitioner had zero taxable income and no income tax
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liability. He claimed a refund of $10,345.41 in Federal income
tax withholdings.
Respondent made no adjustments to either the income or the
itemized deductions on petitioner's return. Petitioner did not
include with his return the necessary form for computation of the
AMT under section 55. After he was contacted by respondent,
petitioner submitted to the Internal Revenue Service (IRS) Form
6251, Alternative Minimum Tax–-Individuals, which reflected an
AMT of $7,266.83. Petitioner made no payments to the IRS of the
AMT, although he paid $1,826.54 as additional tax under section
72(t) for his early withdrawal during 2000 of a qualified pension
plan. In the notice of deficiency, respondent determined that
petitioner was liable for the AMT in the amount of $7,267. No
other determinations were made with regard to petitioner's 2000
Federal income tax return.
Petitioner's principal argument is that, if he is held
liable for the AMT, that liability effectively negates or
eliminates the tax benefits of his itemized deductions.
Petitioner further argues that, if he is liable for the AMT, the
accrued interest of $510.44 on the deficiency should be abated
because the deficiency is one he did not know existed at the time
he filed his return.
Section 55(a) imposes a tax equal to the excess of the
tentative minimum tax over the regular tax. The tentative
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minimum tax for noncorporate taxpayers is equal to 26 percent of
so much of the taxable excess as does not exceed $175,000. Sec.
55(b)(1)(A)(i). The taxable excess is that amount by which the
alternative minimum taxable income (AMTI) exceeds the exemption
amount. Sec. 55(b)(1)(A)(ii). The exemption amount for
individuals filing singly, as in petitioner's case, is $33,750.
Sec. 55(d).
AMTI equals the taxpayer's taxable income for the year
determined with the adjustments provided in section 56. 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
gross income. Sec. 56(b)(1). Also, no deduction for the
personal exemption under section 151 is allowed. Sec.
56(b)(1)(E). Petitioner presented no evidence that the AMT was
incorrectly calculated. His sole argument, noted above, is that
the AMT effectively deprives him of the benefit of his itemized
deductions, all of which were accepted by respondent.
The determination of a taxpayer's AMT requires a
recomputation of taxable income, leading to a new tax base,
alternative minimum taxable income. Sec. 55(b)(2). In making
the recomputation, certain (but not all) itemized deductions are
not allowed, as well as the personal exemption. In particular,
as relates to petitioner, miscellaneous itemized deductions are
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not allowed in the computation of alternative minimum taxable
income. Sec. 56(b)(1)(A)(i). The sum of these disallowed items
will trigger a liability for the AMT. In petitioner's situation,
his unreimbursed employee expenses alone total $60,445.32
(compared to his reported wage income of $43,953.68). Coupled
with the other unallowable expenses, specifically spelled out in
the statute, petitioner's AMT liability ensues. The AMT serves
to impose a tax whenever the sum of specified percentages of the
excess of alternative minimum taxable income over the applicable
exemption amount exceeds the regular tax for that year. Sec.
55(a), (b)(1)(A), (C), (d)(1); Huntsberry v. Commissioner, 83
T.C. 742 (1984). However unfair this statute might seem to
petitioner, the Court must apply the law as written. As this
Court noted in Hays Corp. v. Commissioner, 40 T.C. 436, 443
(1963), affd. 331 F.2d 422 (7th Cir. 1964): "The proper place
for a consideration of petitioner's complaint is the halls of
Congress, not here." Respondent, therefore, is sustained on this
issue.
Petitioner argues that he should not be liable for interest
on the deficiency, in effect, seeking an abatement of interest.
When petitioner filed his return, he reported a zero tax
liability and claimed a refund of $10,349.41 from tax
withholdings. He argues that he should not be liable for
interest on tax he did not know that he owed.
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Section 6404(e)(2) provides:
The Secretary shall abate the assessment of all interest on
any erroneous refund under section 6602 until the date
demand for repayment is made, unless–-(A) the taxpayer (or a
related party) has in any way caused such erroneous refund,
or (B) such erroneous refund exceeds $50,000.
Without passing upon the question of whether the refund in
this case constitutes an erroneous refund that was caused by
petitioner's failure to include a computation of the AMT, this
Court has no jurisdiction over an abatement of interest issue
arising under section 6404(e). As the Court noted in 508 Clinton
St. Corp. v. Commissioner, 89 T.C. 352, 355 (1987): "Section
6404(e), by its very terms, does not operate until after there
has been an assessment of interest, which has not yet occurred in
this case." In this case, neither the deficiency nor the
interest on the deficiency has been assessed, nor can any
assessment be made until the decision in this case is entered.
Petitioner may file with respondent an administrative request for
abatement of any interest assessed. If, in a notice of final
determination, petitioner's request is denied, petitioner may
then petition this Court for a review of that determination.
However, this Court will order an abatement only if it is shown
that the Commissioner abused his discretion in denying the
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abatement. Sec. 6404(i);2 Rule 280(b); Krugman v. Commissioner,
112 T.C. 230, 239 (1999). The Court, therefore, declines to pass
upon the merits of petitioner's claim for an abatement of
interest. Indeed, this Court has no jurisdiction over this issue
at this time.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.
2
Sec. 6404(h) was redesignated sec. 6404(i) by the
Internal Revenue Service Restructuring & Reform Act of 1998, Pub.
L. 105-206, sec. 3309(a), 112 Stat. 745.