Question

Otto and Monica are married taxpayers who file a joint tax return. For the current tax year, they have AGI of $80, 300. They have excess depreciation on real estate of $67, 500, which must be added back to Taxable Income to arrive at AMTI. The amount of their mortgage interest expense for the year was $25,000, and they made charitable contributions of $7, 500. They have no other itemized deductions. If Otto and Monica's taxable income for the current year is 39, 800, determine the amount of their AMTI.

Answer 1

the AMT is 115, 300

Step-by-step explanation:

The question is to determine the Alternate Minimum Tax (AMT). This represents a type of tax that is undertaken on estates, trusts, individuals and corporations by the Federal government of the United States. It works such that some items of tax preference are summed back to increase the amount of gross income.

The calculation is as follows:

Description Amount ($)

Otto and Monica's Adjusted Gross income 80,300

Add back: Depreciation in excess on real estate 67,500

This becomes the Minimum Income taxable 147,800

Subtract the following as deductions

Interest expense on mortgage (25,000)

Charitable contributions (7,500)

The AMT is 115, 300