Question

A taxpayer who expects to be subject to the AMT will not realize a tax benefit from using a home equity line of credit to buy a car.

a) True
b) False

Answer 1

A taxpayer subject to the AMT will not benefit from using a home equity line of credit to buy a car.

Step-by-step explanation:

A taxpayer who expects to be subject to the Alternative Minimum Tax (AMT) will not realize a tax benefit from using a home equity line of credit to buy a car. This statement is True.

The AMT is a separate tax system that limits certain deductions and credits, resulting in a higher tax liability for some taxpayers. Under the AMT, interest paid on a home equity line of credit is generally not deductible when used to purchase a car, as it is considered personal interest rather than investment or business interest.

Therefore, even if the taxpayer itemizes deductions for regular income tax purposes, they would not receive a tax benefit from the interest paid on the home equity line of credit when calculating their AMT liability.