Required information The following information applies to the questions displaye

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Required information The following information applies to the questions displayed below. In 2017, Deon and NeNe are married filing jointly. They have three dependent children under 18 years of age. Deon and NeNe's AGl is $813,800, their taxable income is $722,750, and they itemize their deductions as follows: real property taxes of $10,000, state income taxes of $40,000, miscellaneous itemized deductions of $4,000 (subject to but in excess of 2% AGI floor), charitable contributions of $11,050, and mortgage interest expense of $41,000 ($11,000 of which is attributable to a home-equity loan used to buy a new car). Use Tax Rate Schedule for reference. a. What is Deon and NeNe's AMT? Deon and NeNe's AMT

Explanation / Answer

a) Calculation of Deon and NeNe's AMT (Amounts in $)

As the regular tax liability is more than tentative minimum tax AMT is zero.

Particulars Amount Explanation 1) Regular Taxable Income 722,750 2) Personal Exemptions 20,250 ($4,050*5) 3) Real Property taxes 10,000 4) State income taxes 40,000 5) Miscellaneous itemized deduction subject to but in excess of 2% AGI floor 4,000 6) Home equity interest expense (mortgage not used to acquire or substantially improve the home) 11,000 7) AMTI 808,000 (1+2+3+4+5+6) 8) Full exemption $84,500 AMT exemption 9) Phase out of exemption $84,500 [(7) - $160,900)*25% not to exceed $84,500 10) AMT Exemption 0 (8 - 9) 11) AMT Base 808,000 (7 - 10) 12) AMT Rate 26% and 28% 26% on first $187,800 of AMT base and 28% in excess of $187,800 13) Tentative Minimum tax 224,484 ($187,800*26%) $48,828+[($808,000 - $187,800)*28%] $173,656 14) Regular Tax liability 231,439.80 $131,628+($722,750 - $470,700)*39.6% 15) AMT 0

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