Sylvester files as a single taxpayer during 2017 and claims one personal exemption. He itemizes deductions...

Sylvester files as a single taxpayer during 2017 and claims one personal exemption. He itemizes deductions for regular tax purposes. He paid charitable contributions of $7,800, real estate taxes of $3,200, state income taxes of $5,950, and interest on a home-equity loan of $2,200. Sylvester’s regular taxable income is $108,000.

a. What is Sylvester's AMTI if he used the home-equity proceeds to purchase a car?

b. What is Sylvester's AMTI if he used the home-equity loan proceeds to build a new garage next to his home?

Solutions

Expert Solution

What is Sylvester's AMTI if he used the home-equity proceeds to purchase a car?
Description. Amount. Explanation

1)Regular taxable income . $108,000

2)Personal exemption . $3,800

3) Real estate taxes. $3,200 . Not deductible for AMT

4) State income taxes. $5,950. Not deductible for AMT

5)Home equity loan interest$2,200 . Not deductible for AMT*

AMTI . $123,150. Sum of (1) through (5) Note: Interest paid on a home equity loan is generally deductible for regular tax purposes regardless of how the proceeds are used. However, interest paid on a home equity loan is only deductible for AMT purposes if the proceeds of the loan are used to acquire or substantially improve the home.

b. What is Sylvester’s AMTI if he used the home-equity loan proceeds to build a new garage next to his home?

Sylvester’s AMTI is $123,150

Description . Amount . Explanation

1)Regular taxable income. $108,000

2) Personal exemption . $3,800

3) Real estate taxes. $3,200 .Not deductible for AMT

4) State income taxes . $5,950 .Not deductible for AMT

AMTI . $120,950 . Sum (1) through (4)

Note: Charitable contributions are deductible for both regular tax and AMT purposes, thus no AMT adjustment is necessary for charitable contributions in either scenario.

ekkarill92 answered 1 year ago

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