§57 — Items of tax preference

57, and sec. 56 does not apply.

Commissioner, supra, we held that tax preferences are a significant, but not necessarily an indispensable component of alternative minimum taxable income. Accordingly, the taxpayers in that case were held liable for the AMT computed in accordance with the specific provisions of section 55, notwithstanding the fact that the taxpayers did not have any items of tax preference for the taxable year in issue.

Commissioner, supra, we held that tax preferences are a significant, but not necessarily an indispensable, component of alternative minimum taxable income. Accordingly, the taxpayers in that case were held liable for the alternative minimum tax computed in accordance with the specific provisions of section 55, notwithstanding the fact that the - 9 - taxpayers did not have any items of tax preference for the taxable year in issue.

Under UBC's Method, which respondent contends is correct, each member of the UBC affiliated group first determines its separate "items of tax preference" pursuant to section 57.

t, reduced by the amt foreign tax credit for the year. Sec. 55(b)(1)(B). AMTI is the taxable income of the taxpayer for the year determined with the adjustments provided in sections 56 and 58 and increased by the amount of items of tax preference in section 57. Sec. 55(b)(2). Section 56(g)(1) provides that the AMTI of any corporation for the taxable year shall be increased by 75 percent of the excess of the corporation’s ACE over the corporation’s preadjustment AMTI, which is the taxpayer’s AMTI

Rather, respondent determined that petitioners are liable for the alternative minimum tax prescribed by section 55. In computing the alternative minimum tax, respondent conceded that petitioners have no items of tax preference within the meaning of section 57. Respondent's determination of the alternative minimum tax is 3 For 1994, each exemption had a value of $2,450. - 4 - based on the following computation and entries from petitioners' income tax return: I. Individual Income Tax Return - For

under subparts A, B, and D of part IV. * * *[17] C. The Two Methods 1. UBC's Method Under UBC's Method, which respondent contends is correct, each member of the UBC affiliated group first determines its separate “items of tax preference” pursuant to section 57. Then, each member's separate items of tax preference are aggregated to establish the UBC affiliated group's total for items of tax preference (UBC's total preferences). That total is reduced by the UBC affiliated group's regular tax liabi

under subparts A, B, and D of part IV. * * *[17] C. The Two Methods 1. UBC's Method Under UBC's Method, which respondent contends is correct, each member of the UBC affiliated group first determines its separate “items of tax preference” pursuant to section 57. Then, each member's separate items of tax preference are aggregated to establish the UBC affiliated group's total for items of tax preference (UBC's total preferences). That total is reduced by the UBC affiliated group's regular tax liabi

um taxable income.¹³ Alternative minimum taxable income is a taxpayer's taxable income determined ¹²Sec. 1.72-17A(f)(4), Income Tax Regs. ¹³Sec. 55(a). -18- [*18] with adjustments under sections 56 and 58 and increased by items oftax preference in section 57.¹4 Ms. Gillette and Mr. Szczepanski's return for 2012 reported an alternative minimum tax of$17,851. They argue that "[i]t is neither fair norjust that Gillette was taxed an alternative minimum tax rate due to her Mirapex-induced gambling" a

Pugsley v. Commissioner, 749 F.2d 691, 692-693 (1 lth Cir. 1985) (time begins to run on date ofmailing ifample time to file a petition). - 13 - not sent to last known address is valid "ifmailing results in actual notice without prejudicial delay"), § 57 T.C. 102 (1971); Frieling v. Commissioner, 81 T.C. 42, 57 (1983) ("[S]o long as the notice ofdeficiency is timely mailed by the Com- missioner and is received without prejudicial delay by the taxpayer * * *, the no- tice is effective for all purp

As relevant herein, section 55(b)(2) defines alternative minimum taxable income as the taxpayer's taxable income for the taxable year determined with the adjustments provided in section 56 and increased by the amounts ofitems oftax preference described in section 57.5 Petitioner had no items oftax preference in 5 As relevant herein, taxable income means gross income less (1) allowable Schedule A itemized deductions and (2) the deduction for personal exemptions.

57.105(2) (West 2006 & Supp. 2011) (fees and costs may be imposed upon a party to civil litigation who has -7- caused unreasonable delay) ;4 Clark v. Clark, 802 So. 2d 478, 478-479 (Fla. Dist. Ct. App. 2001) (upholding an award of attorney's fees applied for before the death of the payee spouse); Hirsch v. Hirsch, 519 So. 2d 1056 (Fla. Dist.

reduced by the AMT foreign tax credit for the year . Sec . 55(b)(1)(B) . AMTI is the taxable income of the taxpayer for the year determined with the adjustments provided in sections 56 and 58 and increased by the amount of items of tax preference in section 57 . Sec . 55(b)(2) . Section 56(g)(1) governs the ACE adjustment to AMTI . Preadjustment AMTI is the taxpayer's AMTI determined under section 55(b)(2) but before adjustments for ACE, ATNOL, or the alternative energy deduction . Sec . 1 .56(g

tions fo r State and local income taxes, personal property taxes, an d miscellaneous itemized deductions . See sec . 56(b)(1)(A) arrive at the -final AMTI, section 55(b)(2)(B) increases the above amount with the .' tax preference items described in section 57 . Petiti.oners .areicorrect that they had no tax preference items . However, their income and adjustments were sufficient to subject them to the AMT, as the computation below shows . Step 2 starts with, determining a "taxable excess" ; whic

nt reduced by the AMT foreign tax credit for the year. Sec. 55(b)(1)(B). amti is the taxable income of the taxpayer for the year determined with the adjustments provided in sections 56 and 58 and increased by the amount of items of tax preference in section 57. Sec. 55(b)(2). Section 56(g)(1) governs the ACE adjustment to AMTI. Preadjustment AMTI is the taxpayer’s AMTI determined under section 55(b)(2) but before adjustments for ACE, ATNOL, or the alternative energy deduction. Sec. 1.56(g)-1(a)(

(Items of tax preference are described in section 57 and include depletion, intangible drilling costs, tax-exempt interest, certain accelerated depreciation or amortization, and exclusion for gains on sale of certain small business stock .) - 5 - Petitioner provides no authority to support his position .

Pertinent to this case, for purposes of computing a taxpayer's AMTI, section 56(b)(3) provides that section 421 shall not apply to the transfer of stock acquired pursuant to the exercise of an ISO .

xable income (AMTI) . Sec . 55(a) ; Allen v . Commissioner, 118 T .C . 1, 5 (2002) . AMTI is defined as the taxpayer's "taxable income" determined with adjustments provided in sections 56 and 58, and increased by items of tax preference described in section 57 . Sec . 55(b)(2) ; Merlo v . Commissioner , 126 T .C . 205, 209 (2006), affd . 492 F .3d 618 (5th Cir . 2007) . The Code generally defines "taxable income" as "gross income" less allowable deductions . Sec. 63(a) . Section 61 expressly def

mum taxable income (AMTl). Sec. 55(a); Allen v. Commissioner, 118 T.C. 1, 5 (2002). AMTl is defined as the taxpayer’s “taxable income” determined with adjustments provided in sections 56 and 58, and increased by items of tax preference described in section 57. Sec. 55(b)(2); Merlo v. Commissioner, 126 T.C. 205, 209 (2006), affd. 492 F.3d 618 (5th Cir. 2007). The Code generally defines “taxable income” as “gross income” less allowable deductions. Sec. 63(a). Section 61 expressly defines “gross in

t applicable for regular tax purposes. Allen v. Commissioner, 118 T.C. 1, 5 (2002). AMTI is defined as the taxable income of a taxpayer determined with adjustments provided in sections 56 and 58 and increased by items of tax preference described in section 57. Sec. 55(b)(2); Merlo v. Commissioner, 126 T.C. 205, 209 (2006), affd. 492 F.3d 618 (5th Cir. 2007); Allen v. Commissioner, supra at 5. Pertinent to this case, for purposes of computing a taxpayer’s AMTI, section 56(b)(3) provides that sect

1, 5 (2002); see also H.

1, 5 (2002) ; see also H.

1-249 (1986), 1986-3 C.B. (Vol. 4) 1, 249, 264. AMTI is defined as the taxable income of a taxpayer for the taxable year, determined with adjustments provided in sections 56 and 58, and increased by the amount of items of tax preference described in section 57. Sec. 55(b)(2). As applicable to the instant case, for purposes of computing a taxpayer’s AMTI, section 56(b)(3) provides that section 421 shall not apply to the transfer of stock acquired pursuant to the exercise of an ISO, as defined by

-264 (1986), 1986-3 C.B. (Vol. 4) 1, 249, 264. AMTI is defined as the taxable income of a taxpayer for the taxable year, determined with adjustments provided in sections 56 and 58, and increased by the amount of items of tax preference described in section 57. Sec. 55(b)(2). For purposes of computing a taxpayer’s AMTI, section 56(b)(3) provides that section 421 shall not apply to the transfer of stock acquired pursuant to the exercise of an ISO as defined by section 422. Therefore, under the AMT

tes v. $359,500 in U.S. Currency, 828 F.2d 930, 933 (2d Cir. 1987) (“‘contrasting language in similar statutes may show that the legislature intended different standards of compliance’” (quoting 2A Singer, Sutherland Statutory Construction, - 38 - sec. 57.06, at 654 (Sands 4th ed. 1984))). Thus, it is the reserve, not merely a contribution equal to the normal cost for the year, that must be computed in determining the account limit. Respondent asserts that courts have held in prior cases, such a

tes v. $359,500 in U.S. Currency, 828 F.2d 930, 933 (2d Cir. 1987) (“‘contrasting language in similar statutes may show that the legislature intended different standards of compliance’” (quoting 2A Singer, Sutherland Statutory Construction, - 38 - sec. 57.06, at 654 (Sands 4th ed. 1984))). Thus, it is the reserve, not merely a contribution equal to the normal cost for the year, that must be computed in determining the account limit. Respondent asserts that courts have held in prior cases, such a

stments provided in sections 56 and 58 and increased by the amount of tax 1 For petitioner, “the term ‘regular tax’ means the regular tax liability for the taxable year (as defined in sec. 26(b)).” Sec. 55(c)(1). - 6 - preference items set forth in section 57. To determine the taxable amount of AMTI, the AMTI is reduced by an exemption amount, which for a single taxpayer is $33,750, subject to a gradual phaseout of the exemption amount as AMTI exceeds $112,500. See sec. 55(d)(1), (3). The applic

MT liability is determining the alternative minimum taxable income (AMTI), which equals the taxpayer’s taxable income for the year with the adjustments provided in sections 56 and 58, and increased by the amount of tax preference items set forth in section 57. To determine the taxable amount of AMTI, the AMTI is reduced by an exemption amount, which for taxpayers filing a joint return is $45,000, subject to a gradual phaseout of the exemption amount as AMTI exceeds $150,000. See sec. 55(d)(1), (

Section 55(b)(1)(A)(i) provides that the tentative minimum tax is 26 percent of so much of the alternative minimum taxable income (AMTI) that does not exceed $175,000 as exceeds the exemption amount of $45,000.

tes v. $359,500 in U.S. Currency, 828 F.2d 930, 933 (2d Cir. 1987) (“‘contrasting language in similar statutes may show that the legislature intended different standards of compliance’” (quoting 2A Singer, Sutherland Statutory Construction, - 38 - sec. 57.06, at 654 (Sands 4th ed. 1984))). Thus, it is the reserve, not merely a contribution equal to the normal cost for the year, that must be computed in determining the account limit. Respondent asserts that courts have held in prior cases, such a

tes v. $359,500 in U.S. Currency, 828 F.2d 930, 933 (2d Cir. 1987) (“‘contrasting language in similar statutes may show that the legislature intended different standards of compliance’” (quoting 2A Singer, Sutherland Statutory Construction, - 38 - sec. 57.06, at 654 (Sands 4th ed. 1984))). Thus, it is the reserve, not merely a contribution equal to the normal cost for the year, that must be computed in determining the account limit. Respondent asserts that courts have held in prior cases, such a

t, reduced by the AMT foreign tax credit. Sec. 55(b)(1)(B). AMTI, in turn, is defined as the taxpayer’s taxable income for the year determined with the adjustments provided in sections 56 and 58 and increased by the tax preference items described in section 57. Sec. 55(b)(2). As pertinent here, one of the adjustments provided in section 56 is the book income adjustment of section 56(f), as follows: SEC. 56(f). Adjustments for Book Income of Corporations.-- (1) In general.--The alternative minimu

nt for married couples filing a joint return is $45,000. Sec. 55(d)(1)(A). AMTI equals the taxpayer’s taxable income for the year determined with the adjustments provided in section 56 and increased by the amount of tax preference items described in section 57. Sec. 55(b)(2). In calculating AMTI, no deduction is allowed for State and local income taxes paid and miscellaneous itemized deductions. Sec. 56(b)(1)(A). Also, no deduction for personal exemptions under section 151 is allowed. Sec. 56(b)

ve minimum taxable income" means the taxable income of the taxpayer for the taxable year-- - 15 - (A) determined with the adjustments provided in section 56 and section 58, and (B) increased by the amount of the items of tax preference described in section 57. If a taxpayer is subject to the regular tax, such taxpayer shall be subject to the tax imposed by this section (and, if the regular tax is determined by reference to an amount other than taxable income, such amount shall be treated as the

ve minimum taxable income" means the taxable income of the taxpayer for the taxable year-- - 15 - (A) determined with the adjustments provided in section 56 and section 58, and (B) increased by the amount of the items of tax preference described in section 57. If a taxpayer is subject to the regular tax, such taxpayer shall be subject to the tax imposed by this section (and, if the regular tax is determined by reference to an amount other than taxable income, such amount shall be treated as the

g tax figure is reduced by the alternative minimum foreign tax credit. Sec. 55(b)(1), (d). - 15 - (A) determined with the adjustments provided in section 56 and section 58, and (B) increased by the amount of the items of tax preference described in section 57. If a taxpayer is subject to the regular tax, such taxpayer shall be subject to the tax imposed by this section (and, if the regular tax is determined by reference to an amount other than taxable income, such amount shall be treated as the

g tax figure is reduced by the alternative minimum foreign tax credit. Sec. 55(b)(1), (d). - 15 - (A) determined with the adjustments provided in section 56 and section 58, and (B) increased by the amount of the items of tax preference described in section 57. If a taxpayer is subject to the regular tax, such taxpayer shall be subject to the tax imposed by this section (and, if the regular tax is determined by reference to an amount other than taxable income, such amount shall be treated as the

AMTI is computed in the same manner as regular taxable income except that the adjustments - 5 - provided in sections 56 and 58 are taken into account for AMTI, and the tax preference items set forth in section 57 are not permitted to reduce AMTI.

ve minimum taxable income" means the taxable income of the taxpayer for the taxable year-- - 15 - (A) determined with the adjustments provided in section 56 and section 58, and (B) increased by the amount of the items of tax preference described in section 57. If a taxpayer is subject to the regular tax, such taxpayer shall be subject to the tax imposed by this section (and, if the regular tax is determined by reference to an amount other than taxable income, such amount shall be treated as the

t, reduced by the AMT foreign tax credit. Sec. 55(b)(1)(B). AMTI, in turn, is defined as the taxpayer’s taxable income for the year determined with the adjustments provided in sections 56 and 58 and increased by the tax preference items described in section 57. Sec. 55(b)(2). As pertinent here, one of the adjustments provided in section 56 is the book income adjustment of section 56(f), as follows: SEC. 56(f). Adjustments for Book Income of Corporations.— (1) In general. — The alternative minimu

eate a new tax base, the alternative minimum taxable income (AMTI). See sec. 55(b)(2). The normal taxable income is reduced by the adjustments provided for in sections 56 and 58 and increased by the amount of the items of tax preference described in section 57. In petitioner's case, the only applicable adjustment from these sections is the disallowance of the standard deduction and the personal exemption. See sec. 56(b)(1)(E). Petitioner's regular taxable income was $155,599 and was increased by

amount for married couples filing a joint return is $45,000. See sec. 55(d). AMTI equals the taxpayer's taxable income for the year with the adjustments provided in sections 56 and 58 and increased by the amount of tax preference items described in section 57. See sec. 55(b)(2). In calculating AMTI, no deduction is allowed for miscellaneous itemized deductions and State and local taxes paid, unless such amounts are deductible in determining AGI. See sec. 56(b)(1). Also, no deduction for persona

eate a new tax base, the alternative minimum taxable income (AMTI). See sec. 55(b)(2). The normal taxable income is reduced by the adjustments provided for in sections 56 and 58 and increased by the amount of the items of tax preference described in section 57. In petitioner’s case, the only applicable adjustment from these sections is the dis-allowance of the standard deduction and the personal exemption. See sec. 56(b)(1)(E). Petitioner’s regular taxable income was $155,599 and was increased b

AMTI is computed in the same manner as regular taxable income except that the adjustments provided in sections 56 and 58 are taken into account for AMTI, and so-called tax preference items set forth in section 57 are not permitted to reduce AMTI.

AMTI is computed in the same manner as regular taxable income except that the adjustments provided in sections 56 and 58 are taken into account for AMTI, and the tax preference items set forth in section 57 are not permitted to reduce AMTI.

AMTI is computed in the same manner as regular taxable income except that the adjustments provided in sections 56 and 58 are taken into account for AMTI, and the tax preference items set forth in section 57 are not permitted to reduce AMTI.