Controlling income and deductions can prevent imposition of the AMT

Article Abstract:

Taxpayers can reduce their alternative minimum tax (AMT) responsibilities by controlling their income and deductions. The AMT is a 21% tax imposed on a taxable base, the alternative minimum taxable income (AMTI), which is greater than the regular income tax base because many of the regular credits and exclusions are not allowed. Taxpayers calculate regular taxable income and AMTI separately and then pay the larger of the two relevant taxes. Taxpayers can keep current and future tax responsibilities under control by: incurring as many AMT preference items and and adjustments as possible while remaining in a regular tax position; accelerating regular tax items including circulation expenditures and depreciation as much as possible without incurring an AMT liability; and accelerating preference and adjustment items in AMTI before they have to be included in regular tax gross income.

Analysis, Tax accounting, Accounting and auditing, Minimum tax

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Mitigation unavailable to taxpayers that sleep on their rights

Article Abstract:

The Ninth Circuit held in the 'Beaudry Motor Co.' case that the mitigation procedures extending the limitations period are not applicable to a taxpayer that slept on its right to make a claim. The taxpayer concurred with the IRS that it did not submit its refund claim on a timely basis, which it conceded was an absolute bar to the consideration of the refund claim in court. However, the taxpayer relied on the mitigation provisions. Unfortunately, it satisfied only two of the three requirements to take advantage of the mitigation provisions. The taxpayer was able to prove that there was a determination and that this determination was inconsistent with a determination made in a previous year. It was not able to prove that the error was one of the specifically enumerated 'circumstances of adjustment' defined in Sec. 1312.

Cases, Tax refunds

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