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Author: brucemacdougall Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121591  
Subject: Alternative Minimum Tax Date: 4/7/1999 10:10 AM
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Bit by this new four letter word in three letters, AMT! My trading last year provided substantial capitol gains taxed at 20 percent, or so I thought. AMT says this is not enough-- IRS wants 25 percent. Am I doing something wrong?
Bruce
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Author: mathetes Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13958 of 121591
Subject: Re: Alternative Minimum Tax Date: 4/7/1999 10:53 AM
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You asked Bit by this new four letter word in three letters, AMT! My trading last year provided substantial capitol gains taxed at 20 percent, or so I thought. AMT says this is not enough-- IRS wants 25 percent. Am I doing something wrong?

I was going to refer you to www.fairmark.com, a site where AMT and other tax topics are addressed at some length and in good clear English. But, curious to see what the answer is, I went and looked it up. Much to my surprise (and disappointment, in that I may be in your shoes in years to come), I discovered this, copied directly from the following page: http://www.fairmark.com/amt/topten.htm

Long-term capital gains receive the same preferential rate under the AMT as they do under the regular income tax. In theory, they shouldn't cause you to pay alternative minimum tax. In practice, it's possible to be stuck with AMT liability because of a large capital gain. The reasons are a little complicated, but mainly have to do with the fact that a large capital gain reduces or eliminates the AMT exemption amount, which is designed to protect low-income taxpayers from having to pay alternative minimum tax.

Looks like your only mistake was in having such large capital gains. On the other hand, you'll find plenty of folks who will envy you the opportunity to make such a "mistake"

I'd encourage you to look around the pages that those links will lead you to, to satisfy your own understanding. AMT is a frustrating monster; as you say, a four letter word masquerading as three.

mathetes

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13979 of 121591
Subject: Re: Alternative Minimum Tax Date: 4/7/1999 1:13 PM
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Bit by this new four letter word in three letters, AMT! My trading last year
provided substantial capitol gains taxed at 20 percent, or so I thought.
AMT says this is not enough-- IRS wants 25 percent. Am I doing something
wrong?
Bruce
I think so. LOOKS like you put your gains on the wrong Schedule D line. AMT is a specific 26% or 28% tax and comes from a Form 6251. Without knowing what you did and how you did it a real answer is not possible, but I doubt if it is AMT. Ed

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13982 of 121591
Subject: Re: Alternative Minimum Tax Date: 4/7/1999 1:38 PM
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You asked Bit by this new four letter word in three letters, AMT! My
trading last year provided substantial capitol gains taxed at 20 percent,
or so I thought. AMT says this is not enough-- IRS wants 25 percent. Am
I doing something wrong?

Edcosoft interjecting comment I think you did something wrong UNLESS you had "unrealized section 1250 gains" which DON'T come from just "trading" profits.. See below

I was going to refer you to www.fairmark.com, a site where AMT and
other tax topics are addressed at some length and in good clear English.
But, curious to see what the answer is, I went and looked it up. Much to my
surprise (and disappointment, in that I may be in your shoes in years to
come), I discovered this, copied directly from the following page:
http://www.fairmark.com/amt/topten.htm

Long-term capital gains receive the same preferential rate under the
AMT as they do under the regular income tax. In theory, they
shouldn't cause you to pay alternative minimum tax. In practice, it's
possible to be stuck with AMT liability because of a large capital gain.
The reasons are a little complicated, but mainly have to do with the
fact that a large capital gain reduces or eliminates the AMT exemption
amount, which is designed to protect low-income taxpayers from
having to pay alternative minimum tax.

Edcosoft's comment: Actually large Capital Gains don't have any more effect on triggering the AMT than large Ordinary Income, except possibly an unrecaptured Section 1250 gain which, pertinent to the original question, is a 25% taxed gain when reconstituted for the AMT. These come from Form 4797 property, NOT just normal you and me type Capital Gains from sales of stocks, etc. Ed

Looks like your only mistake was in having such large capital gains. On the
other hand, you'll find plenty of folks who will envy you the opportunity to
make such a "mistake"

Edcosoft comment I think your "mistake" was putting something on line 25 or 27 of Schedule D, which show up on line 42 through 46.

I'd encourage you to look around the pages that those links will lead you to,
to satisfy your own understanding. AMT is a frustrating monster; as you
say, a four letter word masquerading as three.

mathetes

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13983 of 121591
Subject: Re: Alternative Minimum Tax Date: 4/7/1999 1:43 PM
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Bit by this new four letter word in three letters, AMT! My trading last year
provided substantial capitol gains taxed at 20 percent, or so I thought.
AMT says this is not enough-- IRS wants 25 percent. Am I doing something
wrong?
Bruce
P.S. to my original reply. a unrecaptured section 1250 gain will be taxed at 25%. Did you have any? Did you file Form 4797? That's where they come from. If not, you made a mistake 'cause AMT is either 26% or 28% and you'r gains are still 20% under AMT even if they are large enough to trigger the AMT. Ed.

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