Question

During the year, Donna Nichols, a single taxpayer, had $60,000 in taxable income. She had no tax preferences, and her itemized deductions included the following:

Home mortgage interest on loan to acquire residence$25,000
Charitable contributions$ 5,000
State and local income taxes$ 4,500
Gambling losses$ 3,000
What amount would be reported by Donna on her current year income tax return as alternative minimum taxable income before the AMT exemption?

Answer 1

The alternative minimum taxable income for Donna Nichols before the AMT exemption would be $97,500.

Step-by-step explanation:

In order to calculate the alternative minimum taxable income, we need to start with the taxable income and add back any adjustments or preferences. For Donna Nichols, her taxable income is $60,000. However, in order to calculate her alternative minimum taxable income, we need to add back certain deductions and preferences. These adjustments include adding back the home mortgage interest on loan to acquire residence ($25,000), charitable contributions ($5,000), state and local income taxes ($4,500), and gambling losses ($3,000). Therefore, the total amount reported by Donna on her current year income tax return as alternative minimum taxable income before the AMT exemption would be $60,000 + $25,000 + $5,000 + $4,500 + $3,000 = $97,500.