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Thanks for the link to your detailed explanation. You wrote:

every relevant dollar of state taxes paid reduces my ordinary income tax by $0.28.

My AMT (Form 1040, Line 44) is $270.91 and I will receive a state tax refund in 2005 of $1,623.86. I have no "unusual" AMT items -- in particular, no capital gains of any sort. Of my refund, $967.54 = $270.91/0.28 is the portion from which I received no tax benefit. Accordingly, the taxable portion of my refund will be $656.32 = $1,623.86 - 967.54. Will I indicate "tax benefit rule" on the appropriate line of next year's 1040? --Bob

I was also at the 28% marginal rate with plenty of other deductions. My AMT was $2,361 and my refund was $1,144. So I'll figure the portion from which I received no tax benefit as you did = $2361/0.28 = $8432.

Then I'll subtract that $8,432 from the refund of $1,144, to get ZERO taxable. I can live with that.

Thanks again.

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