Trial Logs: New Hampshire Man Denied Due Process in Stand Off to Defend his Life and Home
Dale E
In case you haven't heard, there is a man in New Hampshire who didn't
take well to the denial of due process while defending himself against
the IRS. At this point, he has barricaded himself inside his home
which he says he will defend with his life.
We wanted to alert our forum members of this development and provide
this recap of events to date.
__Recap of Events__
The IRS claims that Ed and Elaine Brown owe about $620,000 in back taxes.
Over the years, Ed has offered to pay the tax if they would show him
the law requiring him to pay. He claims the government has never done
that.
Within the past two years, Ed and Elaine could have brought the matter
to closure by simply paying the money the IRS claimed they owed.
Instead, they elected to bring the matter before the court.
When the trial commenced, they found problems with the conduct of the
trial. The judge’s abusive temperament combined with the denial of
the Brown’s motions, evidence and witnesses along with faults with the
proposed jury instructions and other procedural issues made it clear
to the Brown's that they would not get an opportunity to present their
side of the case to the jury.
When they left the court on Thursday, January 11th they decided not to
return for the Friday, January 12th session. Instead, they notified
the court that they would
1. Be willing to pay the amount the IRS claims they owe, if they would
drop the charges against them, or.
2. Return to court if they were assured they would be afforded a fair
trial
The court refused both offers.
I was brought into a conference call on Sunday morning, January 14th.
There were a number of participants in the call including Ed Brown.
He was adamant about his denial of due process, and he saw no reason
for returning to court on Tuesday, January 16th. He also stated that
he had no intention of spending the remainder of his life in prison,
asserting that he hasn’t committed any crimes.
It was clear to us that there were serious flaws concerning the
conduct of Ed’s trial, the same kind of flaws that seem to plaque
every trial involving the government’s enforcement of the income tax.
Some of us on the initial conference call feared Tuesday would bring
an armed conflict, and we wanted to prevent that. We were compelled
to action.
Some people went to Ed and Elaine's property. I believe most went
because they wanted to assure the law enforcement community didn’t
rush in and slaughter Ed Brown and his Wife on Tuesday. The hope was
that witnesses surrounding his property with positive feelings and
prayer would help assure negotiations and a peaceful outcome.
By Tuesday, Janury 16th, Elaine elected to return to court with the
hope of negotiating a plea agreement which somehow never materialized.
Based upon comments Ed Brown has made, I get the impression that the
government was not very sincere about negotiating a settlement with
Elaine.
By Thursday, January 18th, Ed and Elaine were both convicted. Ed
missed half the trial and was convicted in his absence.
To their credit, law enforcement personnel have not attempted to take
Ed Brown into custody to date.
By court order, Elaine is reported to be staying with her son. Ed
remains barricaded at his house and has drawn national media
attention. Citizens have come to his aid and are camping out at his
property. Others are traveling there from around the country.
So, that is where we are today.
I continue to hope for a positive outcome. At some point, I hope
someone can negotiate a solution.
Many of us believe we are long overdue for a frank discussion about
the income tax laws and the conduct of our courts not just in income
tax trials but in every other area of law as well including family
courts.
I believe that this family has suffered tremendously for simply asking
questions regarding our tax laws and for believing they would be
afforded a fair trial. I think they have suffered enough. Hopefully,
we can find a solution to this situation that will assure no one in
this country has to endure this abuse ever again. How we make that
happen is unclear.
Visit our web site and forum for more on this case as it unfolds.
Regards,
The Trial Logs Team.
http://www.triallogs.com
--
cpt banjo
More bullshit from Dale the Cretin.
Brown was such a coward that he didn't have the guts to attend his own
trial. His wife, obviously the smarter of the pair, worked out a deal.
Her mooching husband, who's been living off Elaine's dental practice,
is a typical moronic tax denier who hasn't the brains God gave a cactus.
Shyster1040
Brown should have tried reading 26 USC Sec. 1, "a tax is hereby
imposed...."
Paul Thomas, CPA
http://concordmonitor.com/apps/pbcs.dll/article?AID=/20070110/REPOSITORY/701100361/0/BUSINESS
"We will once and for all show beyond the shadow of a doubt - not reasonable
doubt, beyond the shadow of a doubt - that the federal income tax system is
a fraud," Ed Brown said in his opening statement.
In 1996, the Browns filed a joint return with a zero on the line that should
have shown income from Elaine Brown's practice, according to Paul Crowley,
an IRS agent who described the document. That year, the Browns claimed they
owed no income tax and appended a letter to their return form. According to
portions of the letter Crowley read aloud, the Browns' explanation of their
return included contentions that the federal income tax only applied to
residents of Washington, D.C., or other federal territories and that Supreme
Court precedent had found that labor was not taxable.
Shortly after their arrest, the Browns said they wanted a lawyer but were
having difficulty finding one willing to argue their unconventional views
about tax law.
Yesterday, Ed Brown said he and his wife ultimately decided against an
attorney because they were concerned that all bar members were too closely
tied to the courts to represent their views impartially.
"Attorneys do not understand constitutional law," he said, in an interview
after testimony wrapped up. "Attorneys do not understand IRS law."
Instead of an attorney, Ed Brown said he and his wife are relying on a
handful of outside advisers, none of them lawyers.
In an unrelated story, prison records show that one Larken Rose received
several telephone calls from an Ed Brown.
--
If electricity comes from electrons, does morality come from morons?
----------------
Paul A. Thomas, CPA
Athens, Georgia
cpt banjo
Paul Thomas, CPA wrote:
>
> In an unrelated story, prison records show that one Larken Rose received
> several telephone calls from an Ed Brown.
They say misery loves company. So does stupidity.
Paul Thomas, CPA
http://www.digitaljournal.com/article/94871/All_Hell_Might_Break_Loose_As_Armed_Man_and_25_Others_Barricades_Theirselfs_in_Home
Brown and about 25 supporters said they will defend themselves against
capture if necessary. Bernie Bastian, a supporter who said he was carrying
two guns, said they would stand with their friend.
How much you willing to bet they won't stand next to him in the prison
showers.
--
"For those who believe, no explanation is necessary. For
those who do not, none will suffice." - Joseph Dunniger
Dale E
cpt banjo wrote:
> More bullshit from Dale the Cretin.
When you can't refute, or cite the law... Call names.
Thank you for helping the Tax Honesty Movement.
--
Dale E
Shyster1040 wrote:
...Upon taxable income.
No taxable income- no tax.
Your move Shyster.
Quote section 63.
--
Paul Thomas, CPA
Dale, you'd like, have to make a coherent statement that you are claiming to
be fact for it to be refuted.
Here's a fact for you, Larken paid the taxes he owed.
--
Have no fear of perfection - you'll never reach it.
----------
Paul A. Thomas, CPA
Shyster1040
No taxable income- no tax.
""
Do you really want this horse-whipping again, Dale?
Dale E
Your move Shyster.
Paul Thomas, CPA
"Dale E" <"Dale E"@synapticsparks.info> wrote
> No taxable income- no tax.
You fail to prove that Larken (or you) or that dumbass Brown in Mass. that's
hold up in his house with 25 like-minded idiots didn't have income that is
subject to the income tax.
All facts prove that they have taxable income for the years in question.
That's why Larken did his stint in jail (and why Tessa is now serving her
term). That's why Larken spit up the taxes he owes on that income. It's
not that, as he claimed, he paid up to "ease the pain and suffering of his
family", it's because he broke the law by not paying the tax due.
Why is it I have the feeling that Mrs Larken struck the deal just like Mrs
Brown did. Larken (and you) should join Ed Brown in armed rebellion at
what's being called a "compound". Maybe you'll go down in the history books
as the dumbest tax protestors. It's looking like 25 of his closest friends
will do jail time for other than tax evasion.
Do you have the balls to join them?
--
If electricity comes from electrons, does morality come from morons?
----------------
Shyster1040
going to restate what I said before."
Dale, do you really want that horse-whipping over taxable income again, or
don't you? If you don't state an affirmative answer, either "yes" or "no"
you will be presumed to have answered "yes," in which case I shall proceed
to tan your lilly-livered hide once again.
Shyster1040
"taxable income." See Glenshaw Glass.
Dale E
Paul Thomas, CPA wrote:
> You fail to prove that Larken (or you) or that dumbass Brown in Mass. that's
> hold up in his house with 25 like-minded idiots didn't have income that is
> subject to the income tax.
Does this mean you wish to engage in a polite argument on the facts of
written law?
Let's start with the penalty statutes 7201, 7202, and 7203.
They do NOT apply to me.
http://www.synapticsparks.info/evidence/c11/penperson.html
Dale E
Shyster1040 wrote:
No taxable income- no tax.
Your move Shyster.
Quote section 63.
Or are you afraid of the written law?
--
Paul Thomas, CPA
> argument on the facts of written law?
Sure. Except you don't present any facts about the law, written or
otherwise. What you present is your opinion, your desires, your hopes, your
delusions. But facts? They've never been something from which you have
tried to argue from.
> They do NOT apply to me.
Denial. Interesting concept.
Shyster1040
once again.
Section 1 imposes a tax on individuals in an amount expressed as a
percentage of the individual's taxable income.
Section 63 defines taxable income as gross income less allowed
deductions.
Section 61 defines gross income as all income, from whatever source
derived, and includes a non-exclusive list of certain items that are
specifically included in gross income.
As a technical matter, if an item falls within one of the enumerated
categories in Sec. 61(a)(1)-(15), it does not actually have to be "income"
within the meaning of the 16th Amendment for the tax to still be
Constitutional. So long as Congress has the power to impose a tax on that
item without regard to apportionment, then the inclusion of that item in
the term "gross income" for purposes of the Code is irrelevant - you don't
look to formal names (most of us, apparently not including Dale, outgrew
that habit sometime in Kindergarten) but to the substance of what the
statute is doing. Thus, regardless of whether wages would be considered
"income" for purposes of the 16th Amendment, since Congress always had the
power to tax wages by means of an excise tax - see Pollock v. Farmers'
Loan & Trust Co. - then the tax imposed by the Code is, in substance, an
excise tax on those wages and, provided the rates used are geographically
uniform, the tax is Constitutionally valid.
As a result, I win either way Dale. If wages are "income," then the Code
constitutes a valid "income tax;" if wages are not "income," then the Code
constitutes a valid excise tax. Either way, wages are taxed under the
Internal Revenue Code and that tax is Constitutional.
You really should do a little reading in tax history, 'cause then you
might actually learn what the term "excise tax" typically referred to, and
thus what meaning(s) it had, in and around the late 1700s. No Dale, I
mean "read," I don't mean mindlessly cut and paste partial, out-of-context
quotes that you are deluded into thinking support you (I was going to say
"your argument" until I realized that you have yet to provide anything
that rises to the level of an "argument" in the logical, as opposed to
infantile emotional, meaning of the word).
E.g., sales taxes imposed on goods like salt, beer, and pork were excise
taxes imposed on the purchasers of those goods. Unless you're going to
claim that the ability to purchase food staples is a "privilege" within
the vernacular meaning of the word (which vernacular actually means
something closer to "license" than to what the term meant in the 1700s),
then it must follow as a matter of simple logic that imposition of an
excise tax is not limited to "privileges."
Dave Johnson
> > Does this mean you wish to engage in a polite
> > argument on the facts of written law?
>
>
>
> Sure. Except you don't present any facts about the law, written or
> otherwise. What you present is your opinion, your desires, your hopes, your
> delusions. But facts? They've never been something from which you have
> tried to argue from.
>
>
> > They do NOT apply to me.
>
>
> Denial. Interesting concept.
I will engage you in a polite argument on the facts of written law
Dale. Be warned: I am arguing with a mental midget!
KEBSC...@aol.com
Dale E wrote:
> Folks,
>
> In case you haven't heard, there is a man in New Hampshire who didn't
> take well to the denial of due process while defending himself against
> the IRS. At this point, he has barricaded himself inside his home
> which he says he will defend with his life.
>
It should of no surprise that a taxpayer's due process rights are being
denied. Particularly since it appears that Treasury is having problems
complying with the law.
Kristin E. Hickman (Minnesota) has posted Coloring Outside the Lines:
Examining Treasury's (Lack of) Compliance with Administrative Procedure
Act Rulemaking Requirements, 82 Notre Dame L. Rev. ___ (2007), on SSRN.
Here is the link to the abstract:
http://taxprof.typepad.com/taxprof_blog/2007/01/hickman_on_trea.html#more
Cheers,
WDK
Shyster1040
Administrative Procedures Act, particularly if the noncompliance is
technical rather than substantive, is qualitatively different from the
sort of thieving substantive non-compliance engaged in by parasitic
free-loaders like the Browns.
KEBSC...@aol.com
Shyster 1040:
Is the Instruction on Line 7 of Form 6251 that has resulted in a
multi-billion FRAUD on the Treasury technical or substantive. If a
taxpayer gets a tax benefit in a year that the regular tax is paid and
then pays the AMT for the year in which the refund of that overpayment
is received neither the income nor the refund is tax DIRECTLY. It is
possible for the refund to increase the capital gains portion of the
AMT.
Here is the problem.
Section 56(b)(1)(D) states,
(D) Treatment of certain recoveries
No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
included in gross income for purposes of determining alternative
minimum taxable income.
Subparagrph A(ii) states,
b) Adjustments applicable to individuals
In determining the amount of the alternative minimum taxable income of
any taxpayer (other than a corporation), the following treatment SHALL
APPLY (IN LIEU OF THE TREATMENT APPLICABLE FOR PURPOSES OF COMPUTING
THE REGULAR TAX):
(1) Limitation on deductions
(A) In general
No deduction shall be allowed -
....
(ii) for any taxes described in paragraph (1), (2), or (3) of section
164(a). Clause (ii) shall not apply to any amount allowable in
computing adjusted gross income.
Paragraphs (1), (2), and (3) of section 164(a) state,
a) General rule
Except as otherwise provided in this section, the following taxes shall
be allowed as a deduction for the taxable year within which paid or
accrued:
(1) State and local, and foreign, real property taxes.
(2) State and local personal property taxes.
(3) State and local, and foreign, income, war profits, and excess
profits taxes.
Section 56(b)(1)(D) DOES NOT STATE,
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income.
IT IS WORTH REPEATING, Section 56(b)(1)(D) DOES STATE,
(D) Treatment of certain recoveries
No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
included in gross income for purposes of determining alternative
minimum taxable income.
NEVERTHELESS, IRS instructions exclude all deductions to which
paragraph (1), (2), or (3) of section 164(a) APPLIED from AMTI
REGARDLESS of whether the income used for the overpayment was taxed
because the AMT was paid and the tax overpayment was disallowed as a
deduction in determining AMTI or the income used for the overpayment
was offset by a allowable deduction and THEREBY EXCLUDED FROM REGULAR
TAXABLE INCOME IN A YEAR THE REGULAR TAX WAS PAID. See Line 7 on Form
6251.
I am not sure how Congress could have made it any more clear that the
refunds of tax overpayments that were not allowed as deductions when
the AMT was paid are the only ones that are to be excluded from AMTI by
section 56(b)(1)(D). Perhaps YOU could offer a suggestion.
Who are the real FRAUDSTERS,The Browns or the bureaucrats that have
continued to issue the BOGUS instruction for twelve years after being
told the instruction was BOBUS
Cheers,
WDK
Paul Thomas, CPA
<KEBSC...@aol.com> wrote
> Who are the real FRAUDSTERS,The Browns
Yes, the Browns, the Roses, and others like them. You know that, so don't
side with them.
--
Paul Thomas, CPA
paultho...@bellsouth.net
Shyster1040
Even without taking the time to read through your post, if you believe
that a line item on the published Form 1040 incorrectly states what the
law is, i.e., requires inclusion in taxable income of an amount that the
statute does not include, then you have a number of rather simple avenues
of redress:
1. Report the item in the manner you reasonably believe the statute
requires, and attach a Form 8275-R, Regulation Disclosure Statement, to
your return in which you briefly explain the reason for your treatment of
the item in question, and file the return. If the IRS disagrees with you,
and asserts a deficiency, then you can
2. Petition the Tax Court for a redetermination of the asserted
deficiency. If you are correct and the Form 1040 incorrectly states what
the statute requires, then you will be vindicated. If you lose at the Tax
Court, you can appeal first to the Circuit Court for the state in which
you live, and second to the Supreme Court. Alternatively, you could
report the item as indicated on the Form 1040, pay the tax thereon, and
3. File a refund suit in either the Court of Claims or the US District
Court for the district in which you live. Again, if you are correct
concerning the putative error on Form 1040, you will be vindicated. If
you win, you get a refund plus interest thereon. If you lose, you can
appeal first to the Circuit Court and second to the Supreme Court.
That is due process of law. That is all that is required, and such a
system is more than capable of detecting most if not all of the mistakes
made by an administrative agency like the IRS.
In point of fact, the whole concept of due process of law necessarily
implies that administrative agencies will make mistakes from time to time
(if they didn't, there wouldn't be any need for review of administrative
action, which would by itself constitute due process), and as a result,
that the existence of a mistake or error, even an intentional error, is
not in and of itself a violation of due process.
In fact, a violation of due process only occurs if you are not given an
adequate opportunity to be heard, present evidence, cross-examine the
agency, and have an impartial decisionmaker determine the issue.
As a result, if the IRS has made a mistake on Form 1040, and even if that
mistake is palpable and has been repeatedly brought to the attention of
the Commissioner himself, there is no violation of due process if the
three alternative means of redress are open to you.
By the way, had you actually read the article you think says things it
doesn't, you would have realized that it only concerned itself with
technical violations of the APA rules, not with substantive errors in tax
law, and therefore is wholly inapplicable to your situation.
Now, reflect a little on Mr. Brown's situation. Mr. Brown has had ample
opportunity to state his case, show his evidence, cross-examine the IRS,
and persuade an impartial decisionmaker of the correctness of his
position, and he has utterly failed to do so. He has therefore received
all the process that is his due, and it is now his obligation to quit his
puling whinging and pay up his tax debts.
The contrast between the IRS, as described in the article and in your
whinging complaint, and the Browns could not be more black-and-white.
Richard Macdonald
news:1169581593.7...@q2g2000cwa.googlegroups.com...
>
> NEVERTHELESS, IRS instructions exclude all deductions to which
> paragraph (1), (2), or (3) of section 164(a) APPLIED from AMTI
> REGARDLESS of whether the income used for the overpayment was taxed
> because the AMT was paid and the tax overpayment was disallowed as a
> deduction in determining AMTI or the income used for the overpayment
> was offset by a allowable deduction and THEREBY EXCLUDED FROM REGULAR
> TAXABLE INCOME IN A YEAR THE REGULAR TAX WAS PAID. See Line 7 on Form
> 6251.
Right, because until you can cite when AMTI is NOT calculated,
AMTI is calculated EVERY YEAR, regardless of any AMT being due.
So, is AMTI calculated every year, yes or no?
Until this is clarified, the rest of your assertions cannot be discussed.
KEBSC...@aol.com
On Jan 23, 3:54 pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
Shyster1040:
To bad you did not read my message. Without doing so you can't
evaluate what I have written in the next paragraph
Your response is laced with "IF'S" that are not applicable to my
situation. The reality is that I have filed returns, two original and
two amended, that were based on sections 56(b)(1)(D) and 111(a) of the
the IRC rather than FRAUDULENT IRS instructions. In all four cases
IRS accepted the returns. Full disclosure was made. I suggest that
IRS accepted the returns because they knew that I would prevail in
court and they did want to risk going there because they want to keep
the FRAUD going.
SOMEONE NEEDS TO ASK WHY IRS WANTS TO "DOUBLE TAX" THE ITEMIZED
DEDUCTION RECOVERIES OF TAXPAYERS PAYING ONLY THE REGULAR TAX AND TAX
THE INCOME RELATED TO DEDUCTIBLE TAX OVERPAYMENTS/REFUNDS "DOUBLE OR
NOTHING" WHEN DOING SO IS CLEARLY ILLEGAL UNDER THE IRC. OBVIOUSLY YOU
WILL NEVER BE THAT SOMEONE.
Cheers,
WDK
KEBSC...@aol.com
On Jan 23, 5:54 pm, "Richard Macdonald" <rmacdon...@verizon.net> wrote:
> <KEBSCHU...@aol.com> wrote in messagenews:1169581593.7...@q2g2000cwa.googlegroups.com...
>
>
>
> > NEVERTHELESS, IRS instructions exclude all deductions to which
> > paragraph (1), (2), or (3) of section 164(a) APPLIED from AMTI
> > REGARDLESS of whether the income used for the overpayment was taxed
> > because the AMT was paid and the tax overpayment was disallowed as a
> > deduction in determining AMTI or the income used for the overpayment
> > was offset by a allowable deduction and THEREBY EXCLUDED FROM REGULAR
> > TAXABLE INCOME IN A YEAR THE REGULAR TAX WAS PAID. See Line 7 on Form
> > 6251.Right, because until you can cite when AMTI is NOT calculated,
> AMTI is calculated EVERY YEAR, regardless of any AMT being due.
>
> So, is AMTI calculated every year, yes or no?
>
> Until this is clarified, the rest of your assertions cannot be discussed.
Lil' Dickie:
Your comments are irrelevant. The word in the statutue is "APPLIED"
not calculated.
Cheers,
WDK
Richard Macdonald
news:1169598801....@s48g2000cws.googlegroups.com...
>
>On Jan 23, 5:54pm, "Richard Macdonald" <rmacdon...@verizon.net> wrote:
>> <KEBSCHU...@aol.com> wrote in
>> messagenews:1169581593.7...@q2g2000cwa.googlegroups.com...
>>
>> > NEVERTHELESS, IRS instructions exclude all deductions to which
>> > paragraph (1), (2), or (3) of section 164(a) APPLIED from AMTI
>> > REGARDLESS of whether the income used for the overpayment was taxed
>> > because the AMT was paid and the tax overpayment was disallowed as a
>> > deduction in determining AMTI or the income used for the overpayment
>> > was offset by a allowable deduction and THEREBY EXCLUDED FROM REGULAR
>> > TAXABLE INCOME IN A YEAR THE REGULAR TAX WAS PAID. See Line 7 on Form
>> > 6251.Right, because until you can cite when AMTI is NOT calculated,
>
>> AMTI is calculated EVERY YEAR, regardless of any AMT being due.
>> So, is AMTI calculated every year, yes or no?
>> Until this is clarified, the rest of your assertions cannot be discussed.
>
>Lil' Dickie:
You are still looking in the mirror and sighing I see.
> Your comments are irrelevant. The word in the statutue is
> "APPLIED" not calculated.
SECTION 56. ADJUSTMENTS IN COMPUTING
ALTERNATIVE MINIMUM TAXABLE INCOME
. . .
(b) ADJUSTMENTS APPLICABLE TO INDIVIDUALS
In determining the amount of the alternative minimum taxable
income of any taxpayer (other than a corporation), the following
treatment shall apply (in lieu of the treatment applicable for
purposes of computing the regular tax):
(1) LIMITATION ON DEDUCTIONS
(A) IN GENERAL
No deduction shall be allowed--
(i) for any miscellaneous itemized deduction (as defined in
section 67(b)), or
(ii) for any taxes described in paragraph (1), (2), or (3)
of section 164(a).
. . .
(D) TREATMENT OF CERTAIN RECOVERIES
No recovery of any tax to which subparagraph (A)(ii) applied
shall be included in gross income for purposes of determining
alternative minimum taxable income.
The statute is applied to AMTI, now again is AMTI calculated
every year, or when under the law is it NOT calculated.
This section applies EVERY year, even those that AMT is not paid.
The adjustments are made EVERY year in order to see IF you
have to pay AMT, so the section applies even in years that no AMT
is paid. The problem is that you do not realize this simple FACT.
--
Richard A. Macdonald, CPA/EA
Be thankful we're not getting all
the government we're paying for.
-- Will Rogers
Shyster1040
situation. The reality is that I have filed returns, two original and
two amended, that were based on sections 56(b)(1)(D) and 111(a) of the
the IRC rather than FRAUDULENT IRS instructions. In all four cases
IRS accepted the returns. Full disclosure was made. I suggest that
IRS accepted the returns because they knew that I would prevail in
court and they did want to risk going there because they want to keep
the FRAUD going.
""
I'll read the meat of your posting when I have the time to deal with the
substantive question of whether you're right. However, to deal with the
limited question as to whether erroneous instructions are a fraud, there
is no need to read your entire posting.
First, the mere fact that the IRS didn't challenge your treatment means
nothing regarding the IRS' position on the matter. At most it means that
you won the audit lottery - congratulations.
Second, assuming that your position is correct and that the instructions
are therefore erroneous, the fact that you reported the items based on the
statute and not the instructions cannot conceivably constitute notice to
the IRS that the instructions are erroneous and need to be revised.
If you want to bring that matter to the attention of the IRS in a
meaningful manner, write a letter to the Associate Chief Counsel's office
that has jurisdiction over the particular item and issue, with a CC to the
Chief Counsel and the Commissioner, explaining that you believe the
instructions on the form are erroneous, giving your legal reasons
therefore, and suggesting that the instructions be revised.
Finally, even if the instructions really are erroneous, that does not
constitute a "fraud" in any sense of the word since the instructions do
not constitute the "law" in the first place and, as such, taxpayers rely
on the instructions alone at their peril. Generally, such reliance is
reasonable given that the IRS generally gets it right; however, if a
taxpayer thinks that the IRS is wrong, the onus is on the taxpayer to
check the statute and the promulgated regulations and rulings to determine
what the law really requires. If the taxpayer does not do that, and
instead relies to his detriment on erroneous instructions, that is the
taxpayer's fault.
In short, no, there is no "fraud" in the situation you describe.
KEBSC...@aol.com
On Jan 24, 3:16 am, "Richard Macdonald" <rmacdon...@verizon.net> wrote:
> <KEBSCHU...@aol.com> wrote in messagenews:1169598801....@s48g2000cws.googlegroups.com...
>
> >On Jan 23, 5:54pm, "Richard Macdonald" <rmacdon...@verizon.net> wrote:
> >> <KEBSCHU...@aol.com> wrote in
> >> messagenews:1169581593.7...@q2g2000cwa.googlegroups.com...
>
> >> > NEVERTHELESS, IRS instructions exclude all deductions to which
> >> > paragraph (1), (2), or (3) of section 164(a) APPLIED from AMTI
> >> > REGARDLESS of whether the income used for the overpayment was taxed
> >> > because the AMT was paid and the tax overpayment was disallowed as a
> >> > deduction in determining AMTI or the income used for the overpayment
> >> > was offset by a allowable deduction and THEREBY EXCLUDED FROM REGULAR
> >> > TAXABLE INCOME IN A YEAR THE REGULAR TAX WAS PAID. See Line 7 on Form
> >> > 6251.Right, because until you can cite when AMTI is NOT calculated,
>
> >> AMTI is calculated EVERY YEAR, regardless of any AMT being due.
> >> So, is AMTI calculated every year, yes or no?
> >> Until this is clarified, the rest of your assertions cannot be discussed.
>
> >Lil' Dickie:.
>
> > Your comments are irrelevant. The word in the statutue is
> > "APPLIED" not calculated.SECTION 56. ADJUSTMENTS IN COMPUTING
> -- Will Rogers-
"Lil Dickie":
Your comments are irrelevant to the issue under discussion. What you
are in essence saying is that it is impossible to write a statutue that
includes refunds that were deductible in a year when the regular tax
was paid and excludes refunds of tax overpayments in a year that the
AMT was paid and that produced a limited capital gains rate based tax
benefit from AMTI. Obviously you are wrong. Here is how Congress did
it.
(D) Treatment of certain recoveries
No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
included in gross income for purposes of determining alternative
minimum taxable income.
Section 56(b)(1)(D) DOES NOT STATE,
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income.
If Congress intended for the refunds of ALL tax overpayment that
produced a tax benefit in prior years to be included as a negative
amount on Line 7 of Form 6251 56(b)(1)(D), the statute would have
stated,
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income.
Obviously, it didn't. The only reason for the statute to specify "No
recovery of any tax to which subparagraph (A)(ii) APPLIED rather than
"No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED" was to make the exclusion apply to refunds that were
from years the AMT was paid. As a result of IRS's BOGUS instruction
neither the income nor the refund related to a deductible tax
overpayment are tax directly when the refund that is excluded from AMTI
is from a year that the regular tax was paid.
Cheers,
WDK
Shyster1040
of excluding any part of a refund of state/local taxes paid in a prior
year.
The instructions to line 7 state, in full: "Include any refund from Form
1040, line 10 (or Form 1040NR, line 11), that is attributable to state or
local income taxes. Also include any refunds received in 2006 and included
in income on Form 1040, line 21, that are attributable to state or local
personal property taxes or general sales taxes, foreign income taxes, or
state, local, or foreign real property taxes. If you include an amount
from Form 1040, line 21, you must enter a description and the amount next
to the entry space for line 7. For example, if you include a refund of
real property taxes, enter “real property” and the amount next to the
entry space."
From that it would appear to me to be the case that all state/local tax
refunds that are included for regular tax purposes are also included for
AMT purposes.
KEBSC...@aol.com
On Jan 24, 4:50 pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
Shyster1040:
The tax refunds entered on Lines 10 or 21 of Form 1040 are included in
the amount entered on Line 1 of Form 6251. So if the amounts from
lines 10 and 21 of 1040 are entered on Line 7 of Form 6251 and ADDED to
the amount entered on Line 1 of Form 6251 the refunds would be DOUBLE
TAXES. However, that is not the case. If you check IRS Form 6251 you
will find that the amount entered on Line 7 is subtracted. POOF! THE
REFUND IS EXCLUDED FROM AMTI. ( R- R = 0) Get Form 6251 from
www.irs.gov.
The amounts entered on Line 10 and 21 increase Taxable Income and can
increase the capital gains portion of the AMT. That is because the only
refunds that are properly enter on Line 7 or Form 6251 are from years
when the AMT is paid and there was the capital gains rate based tax
benefit.
Cheers,
WDK
Richard Macdonald
news:1169657666.1...@k78g2000cwa.googlegroups.com...
Are you still bemoaning natures cruel trick on you.
>Your comments are irrelevant to the issue under discussion. What
> you are in essence saying is that it is impossible to write a statutue
> that includes refunds that were deductible in a year when the regular
> tax was paid and excludes refunds of tax overpayments in a year that
> the AMT was paid and that produced a limited capital gains rate based
> tax benefit from AMTI. Obviously you are wrong. Here is how
> Congress did it.
No, what I am saying is that tax benefit is irrelevant as Section 56
applies to every years filing and thus there is NO year that Section
56 did not apply so that Section 56(d) ALWAYS applies.
>(D) Treatment of certain recoveries
>No recovery of any tax to which subparagraph (A)(ii) APPLIED
>shall be included in gross income for purposes of determining
>alternative minimum taxable income.
So enlighten us, WHEN DOES (A)(ii) NOT APPLY?
Unless you can clearly show when it does not apply, and do not
confuse application with effect, then the section does apply.
KEBSC...@aol.com
Shyster 1040:
NOT REALLY!
You might find an article from the Houson Chronicle of interest. Here
is the link.
http://www.chron.com/CDA/archives/archive.mpl?id=2004_3744399
Here is the abstract for the Houston Chronicle article which was
originally published in Newday on March 10, 2004, two days after I
filed two amended returns that reduced the taxable incomes attributable
to state income tax refunds from being more than twice the amount of
the refunds to being equal to the refunds. Interesting timing.
Here is the abstract.
Newsday
Top IRS Official Caught by Alternative Tax
But to his surprise, Everson has been forced to pay the alternative
minimum tax, called AMT, for the first time. It's a matter of
simplifying a tax system that's far too complex," Everson said.
I wonder if Everson had an entry other than zero on Line 7 of his Form
6251 for tax year 2003. It wouldn't too good if the Commissioner
benefited from a fraudulent instruction that IRS has repeatedly denied
and attempted to cover-up.
Cheers,
WDK
Shyster1040
It only appears to be the case that Form 6521 is illegally excluding all
tax refunds from AMTI; however, because of how the tax return is
structured, and the use of a separate schedule C for business income/loss,
which is carried to line 12 of Form 1040, the net effect is that the only
tax refunds that are taken into account on lines 10 and 21 of Form 1040
are refunds of taxes that were itemized deductions under Section 63(d)
when paid.
Since the only otherwise deductible taxes that are disallowed under
Section 56(b)(1)(A)(ii) are those taxes that are only deductible as
itemized deductions (the flush language of that clause permits AMT
deductions for taxes that were deducted in determining adjusted gross
income), it follows that all refunds that are attributable to earlier tax
payments that were deductible as itemized deductions should be excluded
from income for purposes of the AMT.
The way that refunds of deductible taxes that are not itemized deductions
get into income for AMT purposes, and stay there, is through Schedule C
and line 12 of Form 1040.
Under Section 62, all of the deductions provided for in the Code are
permitted as deductions from gross income in determining adjusted gross
income, but only to the extent that such deductions are "attributable to a
trade or business carried on by the taxpayer" other than that of being an
employee. Sec. 62(a)(1). These taxes are deducted on Schedule C, not on
Schedule A.
When a tax payment that was deducted on Schedule C is refunded in a later
year, that refund must be included in gross business income on Schedule C
of the business to which it relates to the extent that the deduction
provided a reduction in federal tax liability for the year in which paid.
This results from the basic application of Section 61 and Section 111, as
well as the tax benefit rule from case law, and implemented in the
Service's design of the tax return wherein business income and expenses
are reported on Schedule C instead of directly on Form 1040.
As a result, if in Year 1 person A pays $1,000 of local property tax on
personal property used in his trade or business, that payment is a
deductible expense attributable to A's business, is reported as such on
Schedule C, and reduces the amount of business income A reports on line 12
of his Form 1040.
If, in Year 2 A receives a refund of $200 of the tax he paid in Year 1,
then, to the extent that the deduction reduced A's federal income tax for
Year 1, A must report that $200 as other business income on his Schedule C
for Year 2. That has the effect of increasing the business income A
reports on line 12 of his Form 1040 for Year 2, and thus increases the
amount of income A reports for AMT purposes.
However, since the refund was business income, it was not reported on
either line 10 or line 21 of Form 1040 and, as a result, is not excluded
from gross income on Form 6521 when A goes to determine if he owes any
AMT.
Thus, the intent and literal meaning of the statute are, in fact,
respected by the IRS and the various tax forms, it just isn't quite as
transparent as one might wish. In particular, unless you really take the
time to work through how all the different schedules of the tax return
work and, unless you have reason to work through Schedule C and realize
that business-related tax refunds come into income through Schedule C
rather than directly on Form 1040, you are more than likely to reach the
conclusion that Form 6521 is giving more than the statute allows when it
appears to back all tax refunds out of gross income for AMT purposes.
That's probably not written as concisely as it could be, but hopefully
it's readable enough to follow.
Cheers
Shyster1040
56(b)(1)(A)(ii) does not apply to any amount of tax paid that is allowed
as a deduction in determining adjusted gross income under Section 62.
Those payments are only taxes that are attributable to the taxpayer's
trade or business, other than that of being an employee. Thus, for
example, state/local personal property tax on property used in a trade or
business is a tax that, when paid, may be deducted in full in determining
adjusted gross income.
As a result, 56(b)(1)(A)(ii) does not apply to that tax, as provided for
in the flush language that immediately follows that provision itself.
Shyster1040
6251 for tax year 2003. It wouldn't too good if the Commissioner
benefited from a fraudulent instruction that IRS has repeatedly denied
and attempted to cover-up.
""
As I have explained elsewhere (post of 1/24 in the evening), the
instruction is not fraudulent. In fact, the instruction is perfectly
correct. The only tax refunds that get reflected on lines 10 and 21 of
Form 1040 are refunds of taxes that were only allowed as itemized
deductions. Since the effect of Sec. 56(b)(1)(A)(ii) is to only disallow
itemized deductions for tax payments, the necessary consequence of
56(b)(1)(D) is to exclude from income for AMT purposes refunds of all
taxes that were only allowed as itemized deductions in an earlier year.
The only taxes that are not itemized deductions are tax payments that are
"attributable to the taxpayer's trade or business" as per Sec. 62. These
are the only tax deductions that are allowed in determining adjusted gross
income. As a result, refunds of these taxes are the only refunds that
should be included in gross income for AMT purposes. Since taxes that are
"attributable to a taxpayer's business" are deducted on Schedule C from
gross business income, a refund of such taxes in a later year must also be
reported on Schedule C as other business income. That causes your
business income for the year in which you received the refund to increase,
and that results in you reporting a larger amount of business income (or a
smaller business loss) on line 12 of your 2006 Form 1040.
As a result, both your adjusted gross income ("AGI") and your taxable
income before personal exemptions ("TI"), for regular tax purposes (i.e.,
the amount you report on line 38 - AGI - or on line 41 - TI - of your 2006
Form 1040), will be increased by the amount of your refund for any tax
allowed as a deduction in figuring AGI (an "AGI Tax").
When you go to determine if you owe AMT, Form 6521 starts with either TI
(if you itemize) or AGI (if you don't itemize); see line 1 of 2006 Form
6521. Thus, when you begin your AMT calculations, the amount of your AGI
Tax refunds is included in your AMT gross income, as are any refunds you
received for tax payments that were only allowed as itemized deductions
(your "Itemized Taxes").
Now, keep in mind that refunds of AGI Taxes are not reported on line 10 or
line 21 of Form 1040. Only refunds of Itemized Taxes are reported on
those lines; refunds of AGI Taxes are reported on Schedule C and therefore
in effect end up being reported on line 12 of the 2006 Form 1040.
Thus, when you work through the various lines of Form 6521, the only tax
refunds you subtract from AMT gross income are refunds reported on lines
10 and 21 of Form 1040; i.e., you only subtract Itemized Taxes. Any
refunds of AGI Taxes increased the amount that you report on line 1 of
Form 6521, so those refunds are in the calculation, but they never get
taken out of that amount because none of the line items of Form 6521
permits you to subtract any tax refunds reported on Schedule C. As a
result, when you get to line 28 of Form 6521, where you calculate your AMT
taxable income, any refunds of AGI Taxes you received are still in the
amount you report on line 28 of Form 6521.
As a result, if you received both a refund of AGI Taxes and a refund of
Itemized Taxes, the only refund you will subtract (i.e., exclude) from AMT
gross income is the refund for Itemized Taxes.
That is precisely what Congress intended to happen when it enacted Sec.
56(b)(1)(A)(ii) and Sec. 56(b)(1)(D).
As an example, assume that in Year 1 person A had $50,000 of business
gross income and paid a local personal property tax of $2,000 for property
used in the trade or business. Assume that A also paid state personal
income tax of $8,000 in Year 1. Assume for simplicity that these are the
only relevant items that will go onto A's Year 1 Form 1040.
In calculating his federal income tax for Year 1, A will report $48,000 of
net business income. In the absence of any other above-the-line items, A
will have an AGI of $48,000. Since A's itemized deductions exceed $5,150,
A itemizes his deductions. A reports state taxes paid of $8,000 on
Schedule A, and takes a deduction on line 40 of Form 1040 in that amount,
leaving A with taxable income before personal exemptions of $40,000, which
is the amount A reports on line 41 of his Form 1040 for Year 1.
In calculating his AMT for Year 1, A will report $40,000 on line 1, $8,000
on line 3, and $0 on line 7. A will thus report $48,000 as AMT taxable
income on line 28 of Form 6521 for Year 1.
As a result, A will be allowed a deduction for AMT purposes of his
business-related tax payment but not his state personal income tax
payment.
Suppose that, in Year 2, A has $60,000 of business gross income, and no
business deductions. Assume also that A pays $10,000 in state income tax.
Also, A receives a refund of $1,000 of the personal property tax he paid
on his business-use property in Year 1, and a refund of $2,000 of state
personal income tax he paid in Year 1.
On A's Year 2 Schedule C, A will report $60,000 of business gross income,
plus $1,000 of business other income from the property tax refund, for net
business income of $61,000, which A will report on line 12 of his Form
1040 for Year 2. A will also report on line 10 of his Form 1040 for Year
2 the $2,000 state personal income tax refund he received.
A will therefore report AGI of $63,000 on line 38 of Form 1040 for Year 2.
Since A itemizes again, he will report Schedule A itemized deductions of
$10,000, and will report $53,000 of taxable income before personal
exemptions on line 41 of his Form 1040.
When A goes to determine his AMT amount on Form 6521, he will report
$53,000 on line 1 of Form 6521 (because he itemized). On line 3 he will
report $10,000, and on line 7 he will report $2,000. On line 28 he will
report $61,000 (i.e., $53,000, plus $10,000, minus $2,000).
As a result, A will be allowed to exclude his state personal income tax
refund, but not his business-related tax refund in determining his AMT
taxable income.
Since A was allowed a deduction for AMT purposes for his business-related
taxes in Year 1, as per the flush language of Sec. 56(b)(1)(A)(ii), he is
now not permitted to exclude a refund of that tax received in Year 2, as
per Sec. 56(b)(1)(D) - in other words, since the business-related tax in
Year 1 was an AGI Tax, Sec. 56(b)(1)(A)(ii) did not "apply" to that tax in
accordance with the flush language of subparagraph (A)(ii) and therefore
the refund in Year 2 is not excluded under Sec. 56(b)(1)(D) because the
refund is of a tax to which subparagraph (A)(ii) did not "apply" in Year
1.
By contrast, since A was not allowed a deduction for AMT purposes for his
state personal income tax paid in Year 1 as per Sec. 56(b)(1)(A)(ii),
because that tax payment was an Itemized Tax and not an AGI Tax, and was
therefore a tax payment to which subparagraph (A)(ii) "applied" in Year 1,
A is permitted to exclude the refund of that tax in Year 2 in determining
his AMT taxable income, as provided for by Sec. 56(b)(1)(D), because the
refund of state personal income tax was a refund of a tax to which
subparagraph (A)(ii) "applied" in Year 1.
Thus, although it's a long and winding path, at the end of the day, A is
only allowed to exclude from AMT gross income refunds of taxes that were
not allowed as deductions in determining his AMT taxable income for a
prior year, and is required to include in AMT gross income refunds of any
taxes that were allowed as a deduction in determining his AMT taxable
income for a prior year, just as is required under Section 56(b)(1)(D).
I'm quite sure that Mark Everson, if he had any non-employee business
income, followed this procedure.
Cheers
Archmedes
> ""I wonder if Everson had an entry other than zero on Line 7 of his
> Form 6251 for tax year 2003. It wouldn't too good if the Commissioner
> benefited from a fraudulent instruction that IRS has repeatedly denied
> and attempted to cover-up.""
>
> As I have explained elsewhere (post of 1/24 in the evening), the
> instruction is not fraudulent.
Hey Old WD!! Looks like you got yourself a live one! Congratulations!
KEBSC...@aol.com
On Jan 25, 8:34 am, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
> ""I wonder if Everson had an entry other than zero on Line 7 of his Form
> 6251 for tax year 2003. It wouldn't too good if the Commissioner
> benefited from a fraudulent instruction that IRS has repeatedly denied
> and attempted to cover-up.
> ""
>
> As I have explained elsewhere (post of 1/24 in the evening), the
> instruction is not fraudulent. In fact, the instruction is perfectly
> correct. The only tax refunds that get reflected on lines 10 and 21 of
> Form 1040 are refunds of taxes that were only allowed as itemized
> deductions (STATEMENT COMPLETED BELOW)
WHEN THE OVERPAYMENT PROVIDED A TAX BENEFIT IN THE PRIOR AS A RESULT OF
REDUCING REGULAR TAXABLE INCOME IN A YEAR THAT THE REGULAR TAX WAS PAID
OR WHEN THE OVERPAYMENT PROVIDED A TAX BENEFIT IN THE PRIOR YEAR WHEN
THE AMT WAS PAID AS A RESULT OF THE DEDUCTION OF THE TAXES PRODUCING A
CAPITAL GAINS RATE BASED TAX BENEFIT BECAUSE THE DEDUCTION OF THE TAXES
ON FORM 1040 CAUSED MORE OF THE CAPITAL GAINS FOR AMT PURPOSES TO BE
TAXED AT 5 PERCENT AND LESS TO BE TAXED AT 15 PERCENT, HENCE, A TAX
BENEFIT EQUAL TO 10 PERCENT OF THE REFUND OF THE TAX OVERPAYMENT THAT
PRODUCED THIS BENEFIT.
Shyster 1040:
THE RESULT OF YOUR ANALYSIS BELOW IS THAT THE REFUND A TAX OVERPAYMENT
THAT WAS REPORTED ON SCHEDULE A AND THAT PRODUCED A TAX BENEFIT IN A
YEAR THE REGULAR WAS PAID WILL NOT BE TAXED IF THE
REFUND IS RECEIVED IN A YEAR THE AMT IS PAID. THAT IS THE RESULT THAT
IS OBTAINED AS A RESULT OF FRAUDULENT IRS INSTRUCTIONS. THUS YOU
CONCUR WITH THE RESULT PRODUCED BY IRS'S FRAUDULENT INSTRUCTIONS FOR
LINE 7 ON FORM 6251.
YOU THEN CORRECTLY POINT OUT THAT IF THE BENEFIT IS THE RESULT OF THE
TAX OVERPAYMENT REDUCING BUSINESS INCOME REPORTED ON SCHEDULE C THE
BENEFIT IS OFFSET BY THE INCLUSION OF THE REFUND OF THE OVERPAYMENT ON
SCHEDULE C IN A FOLLOWING YEAR.
As I have stated previously,
SECTION 56(b)(1)(D) STATES:
(D) Treatment of certain recoveries
No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
included in gross income for purposes of determining alternative
minimum taxable income.
Section 56(b)(1)(D) DOES NOT STATE,
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income.
Since the effect of Sec. 56(b)(1)(A)(ii) is to only disallow
> itemized deductions for tax payments, the necessary consequence of
> 56(b)(1)(D) is to exclude from income for AMT purposes refunds of all
> taxes that were only allowed as itemized deductions in an earlier year.
NOT.
THE PURPOSE OF SECTION 56(b)(1)(D) IS TO EXCLUDE FROM AMTI ONLY THOSE
REFUNDS OF TAXES THAT PRODUCED A CAPITAL GAINS RATE BENEFIT IN THE
PRIOR YEAR WHEN THE AMT WAS PAID. BECAUSE THE REFUND IS INCLUDED IN
REGULAR TAXABLE INCOME IT WILL STILL INCREASE THE CAPITAL GAINS PORTION
THE AMT IF THE REFUND CAUSE A REDUCTION IN THE PORTION OF CAPITAL
GAINS TAXED AT 5 PERCENT.AND THEREBY INCREASED THE PORTION OF CAPITAL
GAINS TAXED AT 15 PERCENT.
NOW JUST HOW MUCH OF THE INCOME USED TO FOR THE PERSONAL STATE INCOME
TAX OVERPAYMENT (REPORTED ON FORM 1040 SCHEDULE A AND THE REFUND OF
THAT OVERPAYMENT ARE TAXED DIRECTLY IF THE REGULAR TAX IS PAID IN THE
OVERPAYMENT YEAR AND THE REFUND IS RECEIVED IN A YEAR THAT THE AMT IS
PAID? ASSUME THAT THE REDUCTION IN TAXABLE INCOME PRODUCED BY THE TAX
OVERPAYMENT EQUALLED THE AMOUNT OF THE OVEPAYMENT.
>
> I'm quite sure that Mark Everson, if he had any non-employee business income, followed this procedure.
IF MARK EVERSON REPORTED A TAX REFUND ON LINES 10 OR 21 OF HIS FORM
1040 FOR TAX YEAR 2003 AND ENTERED THE SUM OF THOSE AMOUNTS ON LINE 7
OF FORM 6251 HE BENEFITTED FROM A FRAUDULENT IRS INSTRUCTION.
> Cheers
CHEERS,
WDK
KEBSC...@aol.com
On Jan 25, 12:15 pm, "Archmedes" <m...@privacy.net> wrote:
> Shyster1040 wrote:
> > ""I wonder if Everson had an entry other than zero on Line 7 of his
> > Form 6251 for tax year 2003. It wouldn't too good if the Commissioner
> > benefited from a fraudulent instruction that IRS has repeatedly denied
> > and attempted to cover-up.""
>
> > As I have explained elsewhere (post of 1/24 in the evening), the
> > instruction is not fraudulent.Hey Old WD!! Looks like you got yourself a live one! Congratulations!
YEP! SHYSTER1040 IS ANOTHER PEA FROM THE SAME POD THAT CONTAINED
MICHAEL NIFONG. THAT WOULD BE THE "DON'T CONFUSE ME WITH FACTS, I'VE
GOT MY MIND MADE UP" POD.
CHEERS,
WDK
Shyster1040
KEBSC...@aol.com
FRAUDULENT IRS INSTRUCTION FOR LINE 7 OF FORM
6251. IN OTHER WORDS, "IRS COLORING OUT SIDE THE
LINES".
On Jan 22, 11:07 pm, KEBSCHU...@aol.com wrote:
> Dale E wrote:
> > Folks,
>
> > In case you haven't heard, there is a man in New Hampshire who didn't
> > take well to the denial of due process while defending himself against
> > the IRS. At this point, he has barricaded himself inside his home
> > which he says he will defend with his life.It should of no surprise that a taxpayer's due process rights are being
> denied. Particularly since it appears that Treasury is having problems
> complying with the law.
>
> Kristin E. Hickman (Minnesota) has posted Coloring Outside the Lines:
> Examining Treasury's (Lack of) Compliance with Administrative Procedure
> Act Rulemaking Requirements, 82 Notre Dame L. Rev. ___ (2007), on SSRN.
> Here is the link to the abstract:
>
> http://taxprof.typepad.com/taxprof_blog/2007/01/hickman_on_trea.html#...
>
> Cheers,
>
> WDK
Paul Thomas, CPA
<KEBSC...@aol.com> wrote
> .....FRAUDULENT....
You and that dumbass from North Carolina like to toss out that word - most
commonly when you don't like - or don't understand - whatever it is you are
claiming to be "fraudulent".
--
If electricity comes from electrons, does morality come from morons?
----------------
Paul A. Thomas, CPA
Athens, Georgia
Richard Macdonald
news:1169745552.2...@s48g2000cws.googlegroups.com...
>
>As I have stated previously,
>
>SECTION 56(b)(1)(D) STATES:
>
>(D) Treatment of certain recoveries
>No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
>included in gross income for purposes of determining alternative
>minimum taxable income.
>
>Section 56(b)(1)(D) DOES NOT STATE,
>
>No recovery of any tax to which paragraphs (1), (2), or (3) of section
>164(a) APPLIED shall be included in gross income for purposes of
>determining alternative minimum taxable income.
So when does 56(b)(1)(A)(ii) NOT apply to taxes deducted under
164(a)(1),(2)&(3).
Do not confuse effect with application.
Shyster1040
REFUNDS OF TAXES THAT PRODUCED A CAPITAL GAINS RATE BENEFIT IN THE PRIOR
YEAR WHEN THE AMT WAS PAID. BECAUSE THE REFUND IS INCLUDED IN REGULAR
TAXABLE INCOME IT WILL STILL INCREASE THE CAPITAL GAINS PORTION THE AMT
IF THE REFUND CAUSE A REDUCTION IN THE PORTION OF CAPITAL GAINS TAXED AT 5
PERCENT.""
No, the purpose of Section 56(b)(1)(D) is to exclude from AMT gross income
for a later year any refund received in that later year of a tax paid in
an earlier year that was not allowed as a deduction in determining AMT
taxable income for that earlier year. Since the tax was not deductible at
all for AMT purposes, by definition it could not have created a tax
benefit in that earlier year for AMT purposes.
What Section 56(b)(1)(A)(ii) does is to disallow any deduction for taxes
for AMT purposes other than taxes incurred in a trade or business. That
is why the flush language of that clause states "clause (ii) shall not
apply to any amount allowable in computing adjusted gross income." The
only taxes allowed as deductions in computing adjusted gross income are
those "attributable to the taxpayer's trade or business" under Section
62(a)(1). See, e.g., Ostrow v. Commissioner, 122 T.C. 378, 379-80
(2004)("In computing alternative minimum taxable income (AMTI), no
deduction is allowed to an individual for, inter alia, miscellaneous
itemized deductions (as defined in section 67(b)) or 'for any taxes
described in paragraph (1), (2), or (3) of section 164(a)' unless such
taxes are deductible in computing adjusted gross income; i.e., because
incurred in a trade or business. Sec. 56(b)(1)(A)(i) and (ii).")
Thus, the statement that Sec. 56(b)(1)(D) was intended only to exclude
"refunds that produced a capital gains tax benefit in the prior year when
AMT was paid" is simply untrue. If Section 56(b)(1)(A)(ii) "applied" to a
tax paid in Year 1 - i.e., it disallowed a deduction for that tax - then
Section 56(b)(1)(D) provides that a refund of that tax received in a later
year is excluded from AMT gross income. Neither Code provision makes
exclusion depend on whether the tax in question produced a capital gains
or ordinary income tax benefit.
The problem you have identified has nothing to do with erroneous IRS
instructions and everything to do with the way that Congress drafted the
statute.
The gist of the issue you've spotted is that, if a deduction for a tax
payment in Year 1 generated a tax benefit, then a refund of that payment
in Year 2 should not be excluded from income. Which is the basic
principle of the judge-made tax benefit doctrine. However, the way that
Sec. 56(b)(1)(D) works, as it was drafted, is that it excludes refunds
from the AMT gross income regardless of whether the refunded amount
provided a tax benefit or not in the earlier year when it was paid and a
deduction therefor was allowed.
In other words, suppose A overpays his state income tax in Year 1 by $100,
and deducts that amount on his Year 1 return. If A does not have to pay
AMT for Year 1, then his taxable income for Year 1 is reduced by $100 and,
if A is in the 30% bracket, results in a tax savings to A of $3.
If A receives a refund of that amount in Year 2, then, for regular tax
purposes that $100 is included in his taxable income, and would produce
additional tax of $3 if A is still in the 30% bracket. However, if A
instead is required to pay the AMT, then, under Sec. 56(b)(1)(D) he will
be permitted to exclude that $100 from AMT gross income because that $100
is a tax "to which subparagraph (A)(ii) applied" even though A in fact
received a tax benefit from that amount in Year 1.
That may be inconsistent with the basic motivating principle behind the
tax benefit doctrine; however, it is precisely what the statutory language
requires.
Sec. 56(b) provides that "in determining the amount of the alternative
minimum taxable income of any taxpayer...the following treatment shall
apply (in lieu of the treatment applicable for purposes of computing the
regular tax):"
Sec. 56(b)(1)(A) provides that "in general. No deduction shall be allowed
- (i) ... (ii) for any taxes described in paragraph (1), (2), or (3) of
section 164(a). Clause (ii) shall not apply to any amount allowable in
computing adjusted gross income."
Sec. 56(b)(1)(D) provides that "treatment of certain recoveries. No
recovery of any tax to which subparagraph (A)(ii) applied shall be
included in gross income for purposes of determining alternative minimum
taxable income."
First, note that the opening language of Sec. 56(b) makes it clear that
the treatment of the items listed in that subsection is disconnected from
the treatment of those items for regular income tax purposes - the
following treatment shall apply in lieu of the treatment of the item for
regular tax purposes. Thus, under the literal language of the statute
itself, the manner in which one of the enumerated items in Sec. 56(b) was
treated for regular tax purposes is irrelevant to how it is to be treated
for AMT purposes. There is therefore a statutory disconnect between the
regular tax consequences of an enumerated item and the AMT consequences of
that item.
Second, Sec. 56(b)(1)(A)(ii) applies to a payment that is a tax described
in Sec. 164(a)(1)-(3) regardless of whether or not that amount is
allowable, allowed but disallowed by another section, actually claimed, or
not claimed at all for regular tax purposes. All it says is: if the
taxpayer has an item of expenditure that is described in one of those
three clauses, then the taxpayer is not permitted to take a deduction for
that expenditure for purposes of determining his AMT taxable income.
It specifically does not say that no deduction is allowed for such an
amount, but only if a deduction was allowed for that amount for purposes
of computing the taxpayer's regular tax.
Thus, the treatment of an item under Sec. 56(b)(1)(A)(ii) is completely
independent of how that item is treated for regular tax purposes.
In particular, Sec. 56(b)(1)(A)(ii) applies to an amount paid as a tax
described in Sec. 164(a)(1)-(3) regardless of whether or not that amount
is either allowed or claimed as a deduction for regular tax purposes. For
example, suppose that person A only had itemized deductions of $4,000 and
therefore took the standard deduction of $5,150 for regular tax purposes.
If A had an itemized tax expense of $100, A would not have taken a
deduction for that amount because he chose not to itemize. Nonetheless,
Sec. 56(b)(1)(A)(ii) still applies to that amount, and no deduction is
allowed for it for purposes of AMT.
Thus, regardless of whether a taxpayer pays only the regular tax liability
for a given year, or must instead pay the AMT, Sec. 56(b)(1)(A)(ii) still
applies to the amount of any itemized tax expenses for that year.
Sec. 56(b)(1)(D) carries the disconnect between the regular tax treatment
of an item and the AMT treatment of an item to its logical conclusion;
namely, Sec. 56(b)(1)(D) excludes refunds of amounts to which Sec.
56(b)(1)(A)(ii) "applied" regardless of whether or not the application of
Sec. 56(b)(1)(A)(ii) caused an increase in the taxpayer's tax due for the
year in which the item refunded was originally paid.
This result occurs because a taxpayer must calculate his AMT for each
year, but only has to pay the AMT if it exceeds his regular tax liability.
Thus, even if the disallowance of a deduction for a state income tax
payment under Sec. 56(b)(1)(A)(ii) had no effect on a taxpayer's tax
liability for the year of payment because the taxpayer's regular tax
liability was greater than his AMT liability, and as a result the taxpayer
received a tax benefit from that amount in Year 1 because it reduced his
regular tax liability, he is still entitled to exclude a refund of that
state income tax payment in Year 2 under Sec. 56(b)(1)(D) for the simple
reason that Sec. 56(b)(1)(D) operates regardless of whether or not the
taxpayer had to pay the AMT in the earlier year, and thus operates
independently of whether or not the taxpayer received a tax benefit from
the item for regular tax purposes.
In order to achieve the result you want to get to, the language of Sec.
56(b)(1)(D) would have to be amended to read as follows: "No recovery of
any tax to which subparagraph (A)(ii) applied shall be included in gross
income for purposes of determining alternative minimum taxable income, but
only if, and to the extent that, such tax provided a tax benefit for the
year in which such tax was paid."
The point of the AMT is that it is a fully independent parallel tax to the
regular income tax, and therefore operates fully independently of the
regular tax unless the statute explicitly provides otherwise. For each
tax year, however, you only have to pay the tax that generates the larger
amount of tax liability. Other than that, there is no necessary
correlation between the two, what happens in one does not affect what
happens in the other, and the two tax systems utilize separate accounting
systems to keep track of what has, and what has not, already been taxed in
an earlier year. That is why taxpayers who are subject to the AMT have to
keep two sets of basis books for assets they own - one set of books tracks
basis for regular tax purposes and the other set tracks basis for AMT
purposes.
As an example, if in Year 1 you are allowed a depreciation deduction of
$1,000 on an asset for regular tax purposes and a deduction of only $400
for AMT purposes, and if your original basis in the asset was $4,000, at
the end of Year 1 you would have a regular adjusted basis of $3,000 and an
AMT adjusted basis of $3,600. However, if in Year 1 your regular tax
liability exceeded your AMT liability you would not pay AMT for Year 1.
As a result, you get to claim the tax benefit of the full $1,000
deduction.
If the depreciation deductions for Year 2 are also $1,000 for regular tax
purposes and $400 for AMT purposes, you would be entitled to claim a $400
deduction for AMT purposes and, if your AMT was greater than your regular
tax liability, you would get the tax benefit of that $400 deduction, even
though you have already received the tax benefit for that amount in Year 1
because you got to claim the tax benefit of a $1,000 deduction for Year
1.
In other words, at the end of Year 2 you would have taken cumulative
depreciation deductions of $1,400, even though, for AMT purposes, you
should "only" have been allowed cumulative deductions of $800. If the tax
benefits derived in an earlier year from an item for regular tax purposes
were intended to affect the computation of the available tax benefit for
AMT purposes in a later year, you would be required in Year 2 to recapture
$200 of the depreciation taken in Year 1 and increase your AMT taxable
income by $200 rather than being able to take an additional deduction of
$400.
Note, this is NOT to be confused with the actual mechanics of determining
AMT depreciation, in which an amount is added back to gross income for AMT
purposes. The way that AMT taxable income is calculated requires a
taxpayer to start from his taxable income for regular tax purposes and
then add (or subtract) the difference between the treatment of an item for
regular tax purposes the the treatment for AMT purposes.
Thus, in the example just given, in Year 2 the taxpayer would start with
his regular tax taxable income, which already includes a deduction of
$1,000 for regular depreciation. Since the AMT calculation starts with
this amount, the taxpayer merely adds back the excess of the regular
depreciation deduction over the allowable AMT depreciation deduction.
Thus, in my example, the taxpayer would add $600 back to his regular tax
taxable income in order to properly take into account the allowable AMT
depreciation. This is precisely the same as first adding back all of the
regular depreciation of $1,000 and then subtracting the AMT depreciation
of $400 (i.e., if regular taxable income is $10,000, and if depreciation
is the only relevant AMT amount, then AMT taxable income equals $10,600,
which is $10,000, plus $1,000, minus $400 and, as should be obvious, that
result can be arrived at by simply adding ($1,000, minus $400) to
$10,000). Don't let the mechanics confuse you about the principles.
Given all of the above, the issue you've pointed out is valid under the
general tax benefit doctrine as developed by the caselaw, but it is simply
beside the point insofar as the statute is concerned. It is an
intentional aspect of the statute, and as a result, the IRS is not
defrauding anyone when they draft instructions to Form 1040 that implement
the design that Congress intended when it enacted the statute.
In order to achieve the result you've been arguing for, the statute would
have to be amended to provide that exclusions under Sec. 56(b)(1)(D) were
only available for refunded amounts that, in fact, actually provided a tax
benefit, whether under the regular tax or the AMT, for the year in which
paid.
As it stands, Sec. 56(b)(1)(D) permits exclusion regardless of whether
there was no tax benefit (because the taxpayer paid the AMT in the earlier
year) or there was a tax benefit (because the taxpayer paid the regular
tax in the earlier year).
Shyster1040
the literal implementation of Congress' intentional decision to have the
AMT and the regular tax operate as separate, independent tax systems, with
the taxpayer paying the higher of the two in any one year. As such, each
system keeps a separate set of books in which it tracks the tax
consequences of certain items without regard to how those items are
treated for purposes of the other system.
This should be plain from the opening language of Sec. 56(b), which
provides that the items enumerated in Sec. 56(b) are to be treated in the
following manner "in lieu of the treatment applicable for purposes of
computing the regular tax."
Thus, the fact that an item paid in Year 1 provided a tax benefit under
the regular income tax is irrelevant to whether a refund of that item is,
or is not, excluded from gross income under the AMT.
To repeat, this is an intentionally designed aspect of the AMT, and the
instructions to line 7 of Form 6521 faithfully carry this intent out -
they are not fraudulent.
If you don't like this treatment, then you had better start lobbying
Congress to change it (I'm sure you'll find some sympathetic ears
nowadays); however, you will get nowhere pestering the IRS about it
because the IRS is correctly following Congress' intent, as stated in the
enacted language of the statute.
KEBSC...@aol.com
On Jan 25, 8:26 pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
Shyster1040:
It is obvious that you have forgotten (or never knew) about the
correspondence between IRS and me that was published by Tax Analysts.
Otherwise you would have not contradicted statements made by a
respondent in the IRS Office of Chief Counsel.
BTW, precisely what is about the language in section 111(a) of the
Internal Revenue Code that permits IRS to issue instructions that
result in the gross income attributable to an itemized deduction
recovery exceeding the amount of the recovery?
Cheers,
WDK
KEBSC...@aol.com
On Jan 25, 1:19 pm, "Paul Thomas, CPA" <paulthomascp...@bellsouth.net>
wrote:
> <KEBSCHU...@aol.com> wrote
>
> > .....FRAUDULENT....You and that dumbass from North Carolina like to toss out that word - most
> commonly when you don't like - or don't understand - whatever it is you are
> claiming to be "fraudulent".
Lil' Paulie:
Have you figured out whose input very likely caused North Carolina and
subsequently South Carolina to abandon its MFS requirement for
non-residents when only one spouse had North Carolina income. You can
Goggle it. When you do your research you will find that three
accountants initially supported NCDOR's bogus instructions even though
the instructions constituted "Coloring Outside the Lines" and yielded a
result that violated the Priviliges and Immunities clause of the United
States Constitution.
So be careful when you toss around the term "dumbass", DUMBASS.
Cheers,
WDK
Shyster1040
correspondence between IRS and me that was published by Tax Analysts.
Otherwise you would have not contradicted statements made by a
respondent in the IRS Office of Chief Counsel.
BTW, precisely what is about the language in section 111(a) of the
Internal Revenue Code that permits IRS to issue instructions that
result in the gross income attributable to an itemized deduction
recovery exceeding the amount of the recovery?
""
I'm flattered that you think me so omniscient that I would necessarily be
aware of correspondence between you and the Service, but the fact is I'm
not, so you can quit it with the snide, sh**ty little remarks on that
topic.
Second, I don't care who published your alleged correspondence, I'm not
about to waste even more time by digging around in old issues of Tax
Analysts. If you want the correspondence taken into consideration, then
you'd better post either the correspondence or a link to it here.
Third, since I never said anything about Sec. 111 permitting an inclusion
greater than the amount recovered, your leading question is leading
nowheres. Again, drop the snide, sh**ty attitude and either explain or
shut up.
"Cheers"
Shyster1040
MICHAEL NIFONG. THAT WOULD BE THE "DON'T CONFUSE ME WITH FACTS, I'VE
GOT MY MIND MADE UP" POD.
""
Yep, that WDK is just another pea from the same pod that contained Dale
Eastman. That would be the "spout incomprehensible gibberish about IRS
conspiracies, and insist that the fact that someone has disproved your
claims is just more evidence that you're correct" pod.
Salutations
KEBSC...@aol.com
On Jan 25, 8:20 pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
> ""THE PURPOSE OF SECTION 56(b)(1)(D) IS TO EXCLUDE FROM AMTI ONLY THOSE
> REFUNDS OF TAXES THAT PRODUCED A CAPITAL GAINS RATE BENEFIT IN THE PRIOR
> YEAR WHEN THE AMT WAS PAID. BECAUSE THE REFUND IS INCLUDED IN REGULAR
> TAXABLE INCOME IT WILL STILL INCREASE THE CAPITAL GAINS PORTION THE AMT
> IF THE REFUND CAUSE A REDUCTION IN THE PORTION OF CAPITAL GAINS TAXED AT 5
> PERCENT. AND THEREBY INCREASED THE PORTION OF CAPITAL GAINS TAXED AT 15
> PERCENT.""
>
> No, the purpose of Section 56(b)(1)(D) is to exclude from AMT gross income
> for a later year any refund received in that later year of a tax paid in
> an earlier year that was not allowed as a deduction in determining AMT
> taxable income for that earlier year. Since the tax was not deductible at
> all for AMT purposes, by definition it could not have created a tax
> benefit in that earlier year for AMT purposes.
SO YOU WANT TO FORGET ABOUT THE POSSIBLE CAPITAL GAINS RATE BASED TAX
BENEFIT THAT CAN RESULT FROM A TAX OVERPAYMENT REPORTED ON FORM 1040
SCHEDULE A IN A YEAR THE AMT IS PAID? I GUESS YOU FILE THAT UNDER
"INCONVENIENT TRUTH".
YOUR BASIC MATH SKILLS ARE ON PAR WITH YOU READING COMPREHENSION
SKILLS.
>
> If A receives a refund of that amount in Year 2, then, for regular tax
> purposes that $100 is included in his taxable income, and would produce
> additional tax of $3 if A is still in the 30% bracket.
YOUR BASIC MATH SKILLS ARE ON PAR WITH YOU READING COMPREHENSION
SKILLS.
YOUR WRITING SKILLS ARE ON PAR WITH YOU BASIC MATH SKILLS.
>
> The point of the AMT is that it is a fully independent parallel tax to the
> regular income tax, and therefore operates fully independently of the
> regular tax unless the statute explicitly provides otherwise.
IRS HAS ALREADY ADMITTED CONFUSION ON THAT VERY POINT. THE CONFUSION
PERSISTS.
For each
> tax year, however, you only have to pay the tax that generates the larger
> amount of tax liability. Other than that, there is no necessary
> correlation between the two, what happens in one does not affect what
> happens in the other, and the two tax systems utilize separate accounting
> systems to keep track of what has, and what has not, already been taxed in
> an earlier year. That is why taxpayers who are subject to the AMT have to
> keep two sets of basis books for assets they own - one set of books tracks
> basis for regular tax purposes and the other set tracks basis for AMT
> purposes.
DEPRECIATION DEDUCTIONS AND TAXES ARE NOT IN THE SAME CATEGORY FOR AMT
PURPOSES. THE DEPRECIATION ALLOWED IS A TIMING ISSUE, TAXES ARE NOT.
>
> As an example, if in Year 1 you are allowed a depreciation deduction of
> $1,000 on an asset for regular tax purposes and a deduction of only $400
> for AMT purposes, and if your original basis in the asset was $4,000, at
> the end of Year 1 you would have a regular adjusted basis of $3,000 and an
> AMT adjusted basis of $3,600. However, if in Year 1 your regular tax
> liability exceeded your AMT liability you would not pay AMT for Year 1.
> As a result, you get to claim the tax benefit of the full $1,000
> deduction.
CHEERS,
WDK
>
> If the ...
>
> read more »
Shyster1040
The fact that a particular item gave a tax benefit of, say $10 dollars in
the year in which it was deducted, but will only cause an increase in tax
liability of, say $5 dollars in the year in which the amount paid is
refunded is irrelevant, both under the general tax benefit doctrine, and
in particular under the AMT.
This can be demonstrated very simply, without even having to invoke the
AMT. Suppose in Year 1 TP is in the 30% marginal rate bracket and was
allowed a deduction for $20,000 in state income taxes paid. The effect of
that deduction is, generally, a tax savings - a tax benefit - of $6,000.
Suppose that in Year 3 TP is in the 20% marginal rate bracket and receives
a refund of $10,000 of the state income taxes paid in Year 1.
If the full amount of that refund is included in gross income for Year 3,
it will generate additional tax of $2,000. As a result, TP will have a
net tax savings of $1,000 with respect to that $10,000. I.e., TP saved
$3,000 of federal income tax in Year 1 when he deducted that $10,000, but
only had to pay $2,000 when he got it back, giving a net savings of $1,000
in federal income tax. Nice deal, eh?
If the approach you so mindlessly agitate for were adopted, TP would have
to either include more than the recovered amount in income in Year 3 in
order to ensure that the 20% tax rate generated $3,000 of additional tax
liability, or else would have to apply a different tax rate to the
included amount of the recovery.
However, neither of those methods are permitted under the Code or the case
law. See, e.g., Hillsboro National Bank v. Commissioner, 460 U.S. 370
(1983); Alice Phelan Sullivan Corp. v. United States, 381 F.2d 399 (Ct.
Cl. 1967)(fact that tax rate was lower in year item was originally
deducted than rate in year recovery was included is irrelevant, overruling
prior authority); American Mutual Life Ins. Co. v. U.S., 46 Fed. Cl. 445
(2000), aff'd Fed. Cir. Ct. App. (2001)(tax benefit rule is not designed
to provide dollar-for-dollar matching).
The cases primarily deal with the situation where the taxpayer received
less in initial tax savings than it ultimately had to pay in additional
taxes when the amount paid was later recovered. See, e.g., American
Mutual. The rationale of the court's holding against the taxpayers in
those cases is that inclusion is required unless the taxpayer received no
benefit at all from the earlier deduction; i.e., as long as some benefit
was derived, the fact that the later inclusion is taxed at a higher rate
is not relevant. That rationale cuts both ways, however. Thus, it is
also irrelevant that the taxpayer received a greater benefit from the
original deduction than the amount of additional tax it had to pay upon
the later inclusion.
And that, you witless wonder, is precisely the case that's got your
panties in such a twist. By virtue of getting a deduction against regular
taxes in Year 1, a taxpayer with capital gains gets a further benefit
because more of the capital gain is taxed at a lower rate than would
otherwise apply. However, if the refund is included in a later year when
the taxpayer has no capital gains, the additional tax due is less than the
overall tax benefit obtained in the earlier year.
So what? What that means is that the taxpayer's effective tax rate for
the earlier year was lower than the effective tax rate for the later year,
but since formal rate changes are irrelevant, so are effective rate
changes, unless Congress explicitly says otherwise, which it has not
done.
In particular, Sec. 111 provides that a recovery of an amount deducted in
an earlier year is not included in income "to the extent such amount did
not reduce the amount of tax imposed by this chapter [i.e., chapter 1 of
the Code]." The phrase "to the extent" modifies "reduce" it does not
modify "amount of tax." See American Mutual. Thus, a tax refund received
in a later year is only included in income if, for the year in which paid,
it had some lowering effect on the amount of tax due; however, since "to
the extent" does not modify "amount of tax" there is no requirement that
the amount later included in gross income be of an amount sufficient to
recapture the monetary amount of the tax benefit received in the earlier
year. Instead, the portion of the recovery included is only that portion
that causes a change, however small, when the tax for that prior year is
recalculated as if the earlier deduction had not been allowed.
So, for example, suppose that in Year 1 TP has itemized deductions that
exceed the standard deduction by $100. TP therefore takes the itemized
deduction on his Year 1 return. If TP then receives a refund of $200 on
his Year 1 state income tax in Year 2, TP is only required to include $100
of that recovery in income. The remaining $100 is not included because,
had TP not paid that amount in Year 1, he would have taken the standard
deduction, which would result in the same amount of tax due as if he had
instead taken the itemized deduction.
Take another example. Suppose in Year 1 TP's taxable income is just $1
below the threshhold for the 30% tax rate. TP's deductions included a
deduction of $1,000 for state income tax that TP receives a refund for in
Year 2, when TP is in the 10% bracket. The allowance of that deduction of
$1,000 for Year 1 gave TP a tax benefit of $300, because, if that
deduction had been disallowed, TP would have had $1,000 of income in the
30% bracket. Since the entire recovery provided a tax benefit, TP must
include that entire amount in income for Year 2. However, because TP is
now in the 10% bracket, he only owes an additional tax of $100 on that
$1,000. What a deal! For a Year 2 price of $100 he gets an extra $300 to
spend in Year 1. In fact, if we want to aggravate it, we can calculate
TP's net savings on a present value basis. If we discount that $100 cost
back one year at 6%, we get a present value of $94.34, meaning that TP
actually got a net economic benefit out of that deal of $205.66.
That may seem unfair, but that is the way the Code is intentionally
drafted, and how it is construed and implemented by the courts.
As a result, the fact that a taxpayer who pays regular tax in Year 1 and,
as a result of an overpayment of state income tax, gets an additional
benefit by having more of his long term capital gain taxed at 5% instead
of 15% but who isn't required to recapture that capital gain tax benefit
in Year 2 when he includes the refund in income (perhaps because he
doesn't have any capital gains in Year 2) is utterly irrelevant.
Paul Thomas, CPA
<KEBSC...@aol.com> wrote
> So be careful when you toss around the term "dumbass", DUMBASS.
Oh, it's quite suitable when used toward people like you.
--
Paul Thomas, CPA
paultho...@bellsouth.net
KEBSC...@aol.com
On Jan 26, 8:00 am, "Paul Thomas, CPA" <paulthomascp...@bellsouth.net>
wrote:
> <KEBSCHU...@aol.com> wrote
>
> > So be careful when you toss around the term "dumbass", DUMBASS.Oh, it's quite suitable when used toward people like you.
>
> --
> Paul Thomas, CPA
> paulthomascp...@bellsouth.net
Lil' Paulie:
Have you figured out whose input very likely caused North Carolina to
abandon its MFS requirement for non-residents when only one spouse had
North Carolina income?
Cheers,
WDK
KEBSC...@aol.com
On Jan 25, 10:10 pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
Shyster 1040:
You've painted yourself into a corner with paint that is never going to
dry. I am going to just leave you there. As far as the correspondence
published by Tax Analysts is concerned, you can go find it.
>
> "Cheers"
Cheers,
WDK
KEBSC...@aol.com
On Jan 25, 10:10 pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
Shyster1040:
IT IS WORTH REPEATING, AGAIN, Section 56(b)(1)(D) STATES,
(D) Treatment of certain recoveries
No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
included in gross income for purposes of determining alternative
minimum taxable income.
AND IT IS WORTH REPEATING AGAIN, Section 56(b)(1)(D) DOES NOT STATE:
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income.
But If section 56(b)(1)(D) were amended to exclude a recovery of any
tax to which paragraphs (1), (2), or (3) of section 164(a) APPLIED from
gross income for purposes of deternining altenative minimum taxable
income, how would IRS change the instruction for Line 7 on Form 6251?
Cheers,
WDK
Paul Thomas, CPA
Probably the North Carolina Legislature..........
They write the laws you see.
Shyster1040
described in Sec. 164(a)(1)-(3) are excluded from gross income for AMT
purposes regardless of whether or not that refund produced a tax benefit
in a prior year because the taxpayer's regular tax liability was greater
than his AMT liability.
That is so painfully clear from the statute that I am still having a hard
time figuring out why anyone who has enough brain-cells available to form
more than a two-word sentence and type it out on a computer keyboard
cannot grasp that fact, as you so obviously cannot.
Shyster1040
in Sec. 56(b)(1)(A)(ii) and is a tax to which that Sec. applied in the
year in which the tax was paid, then no recovery of that tax in a later
year is included in income.
Since a taxpayer must compute his AMT for every year, and must always pay
his AMT liability every year, regardless of his regular tax liability,
then Sec. 56(b)(1)(A)(ii) applies to every amount of tax that taxpayer has
paid since the earlier of the enactment of Sec. 56(b)(1)(A)(ii) or the
date the taxpayer first started paying such taxes.
Yes, you read correctly, a taxpayer must pay an AMT liability for every
single year. Go read Sec. 55. Section 55 does not excuse payment of the
AMT liability if the regular tax liability exceeds the AMT liability, Sec.
55 imposes an unconditional obligation to pay the AMT liability in all
events, and then determines the amount of that liability to be the excess
of the tentative AMT over the regular tax liability.
Thus, in any year in which your regular tax liability exceeds your
tentative AMT liability, your AMT liability is $0; in any other year, it
is the excess of the tentative AMT liability over the regular tax
liability.
As a result, for each year you pay two taxes, the regular tax and the AMT
tax, with the only difference being that if your tentative AMT tax is less
than your regular tax, you pay an AMT of only $0.
In other words, for each and every year, your tentative AMT is calculated
based on the disallowance of any deduction for taxes under Sec.
56(b)(1)(A)(ii), and your AMT liability is then either (1) the excess of
your tentative AMT over our regular tax, in which case you got no tax
benefit for AMT purposes from the payment of such taxes (because no
deduction was allowed), or (2) $0, in which case you also got no tax
benefit for AMT purposes from the payment of such taxes because your AMT
liability was not determined with regard to that payment in the first
place - it was simply reduced to $0 by "fiat" of the statute.
In other words, if in Year 1 your tentative AMT liability is greater than
your regular tax, you clearly did not receive a tax benefit for AMT
purposes from your payment of a tax described in Sec. 164(a)(1)-(3)
because Sec. 56(b)(1)(A)(ii) disallowed any deduction for that payment.
On the other hand, if your regular tax liability is greater than your
tentative AMT liability, then you also did not receive a tax benefit for
AMT purposes from your payment of that tax because, notwithstanding the
disallowance of a deduction under Sec. 56(b)(1)(A)(ii), you still ended up
paying MORE tax than you would have paid under the AMT system.
To restate that last point, if your regular tax liability is greater than
your tentative AMT liability, then, FOR AMT PURPOSES, you did not receive
a tax benefit from being allowed to deduct a payment of any tax described
in Sec. 164(a)(1)-(3) because, despite the fact that you were in fact
allowed to deduct that tax payment, you still ended up paying more tax
than you would have paid had that deduction been disallowed FOR AMT
PURPOSES.
From the perspective of the AMT system, which is a separate tax system
that largely runs parallel to the regular tax system, if you had to pay
the regular tax because it was greater than your tentative AMT, not only
did you not receive a tax benefit from being able to deduct a tax you
paid, you actually suffered a tax detriment from being allowed to deduct
that payment.
In other words, if your regular tax liability is greater than your
tentative AMT liability, then, FOR AMT PURPOSES, the allowance of a
deduction for any taxes paid INCREASED your tax liability rather than
decreasing it.
As a result, no refund you receive for taxes described in paragraphs (1),
(2), or (3) of Sec. 164(a) should be included in gross income for AMT
purposes, irrespective of whether the tax payment that refund represents
was allowed as a deduction for regular tax purposes for the year in which
it was paid.
This is the result that line 7 of Form 6521 achieves. Line 10 of Form
1040 excludes from regular gross income the amount of any refund that
didn't provide any tax benefit for regular tax purposes. Line 7 of Form
6521 then finishes the process for AMT purposes by excluding from AMT
gross income any remaining portion of any refund that was included in
income under line 10 of Form 1040.
Since this is the result that the instructions to line 7 of Form 6521
achieve, the instructions are not erroneous or fraudulent. The
instructions simply tell the taxpayer to deduct from his gross income any
portion of a tax refund that was not already deducted from gross income in
computing the amount reported on line 10 of Form 1040.
What the instructions also do not do is permit a double deduction of tax
refunds. In other words, if 50% of a tax refund was excluded in computing
the amount to be reported on line 10 of Form 1040, that 50% will not be
excluded a second time under line 7 of Form 6521.
As a result, if the instructions to line 7 of Form 6521 are properly
followed, any refunds of taxes described in Sec. 164(a)(1)-(3) will be
excluded from income, for AMT purposes, no more and no less than once and
in an amount that is neither less than nor greater than 100% of the amount
of the refund.
This is precisely what the relevant Code sections require, and therefore
the instructions to line 7 of Form 6521 are not only neither erroneous nor
fraudulent, they are 100% accurate.
KEBSC...@aol.com
On Jan 26, 12:06 pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
Shyster1040:
Based on your following response, I take it that your position is that
it wouldn't make any difference in the instructions issued by IRS for
Line 7 on Form 6251 if section 56(b)(1)(D) were changed from stating
D) Treatment of certain recoveries.
No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
included in gross income for purposes of determining alternative
minimum taxable income.
to stating
D) Treatment of certain recoveries.
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income.
Regarding you question about what corner you painted yourself into, its
the DUNCE CORNER.
Cheers,
WDK
Shyster1040
subparagraph (A)(ii) APPLIED" (emphasis added), that language means that
the taxpayer was not allowed a deduction for the amount of that tax for
the in which paid for any reason whatsoever, either for the AMT or the
regular tax.
That interpretation of the word "applied" in 56(b)(1)(D) simply does not
make any sense.
Since 56(b)(1)(D) refers to taxes to which 56(b)(1)(A)(ii) "applied" the
first thing to do is to look at 56(b)(1)(A)(ii) to see if we get any
guidance about what it means to say that Sec. 56(b)(1)(A)(ii) "applied" to
a tax.
Sec. 56(b)(1)(A)(ii) merely states that "no deduction shall be allowed ...
for any taxes described in ...." While that tells us what the effect of
56(b)(1)(A)(ii) is, it doesn't actually state that it "applies," so, to be
careful, we expand our view of the statute a little, and start to review
all of subsection (b) of Sec. 56, since that's the immediate context in
which (A)(ii) is embedded, and specific statutory language is always
construed within the context of the larger statute within which it was
enacted.
Here we finally get some additional grist for our mill. Sec.
56(b)-(b)(1)(A)(ii) states, reading from the first word of subsection (b)
through to the last word of (A)(ii): "[i]n determining the amount of the
alternative minimum taxable income of any taxpayer (other than a
corporation), the following treatment shall APPLY (in lieu of the
treatment applicable for purposes of computing the regular tax): ... (A)
In general. No deduction shall be allowed - ... (ii) for any taxes
described in paragraph (1), (2), or (3) of section 164(a). Clause (ii)
shall not apply to any amount allowable in computing adjusted gross
income."
So, what this tells us is: when computing your alternative minimum
taxable income, the treatment "no deduction is allowed" APPLIES to any tax
described in 164(a)(1)-(3). In other words, if Sec. 56(b)(1)(A)(ii)
APPLIES to a tax, no deduction is allowed for that tax in computing your
alternative minimum taxable income.
Now, this gives us some more information about what the term "applied"
means in Sec. 56(b)(1)(D). However, there is another tax law rule that we
can use to further inform the interpretation of "applied" in Sec.
(b)(1)(D).
That rule is that, if you receive a refund of an amount in the same tax
year in which you originally paid that amount, then you do not treat the
payment and the refund as two separate items for tax purposes; instead,
you net them against each other and only take into account the single net
item. See, e.g., McConway & Torley Corp. v. Commissioner, 2 T.C. 593
(1943).
Thus, if you pay $2,000 of state income tax for Year 1 on January 31st of
Year 1, and then receive a refund of $1,000 on account of an overpayment
of state income tax for Year 1 on November 30th of Year 1, you do not
report a deduction of $2,000 on Schedule A and a taxable refund of $1,000
on Form 1040; instead, you only report a deduction of $1,000 on Schedule
A.
As a result, when 56(b)(1)(D) talks about a recovery of a tax to which
(A)(ii) "applied" it can only be referring to the recovery this year of a
tax that was paid in a preceding year. Since "applied" is the past tense
of "apply" that means that we have to determine at what point in time
would Sec. 56(b)(1)(A)(ii) "apply" - present tense - to the amount that we
received as a recovery. That point in time can only be the prior tax year
in which the recovered amount was originally paid (since we're cash basis
taxpayers), because only in that prior year would (A)(ii) "apply" to the
payment of tax that we have since recovered.
Thus, we have to go back to the earlier year in which the recovered amount
was actually paid to get any farther in determining what 56(b)(1)(D) means
when it tells us that no tax refund we receive this year shall be included
in gross income for purposes of determining alternative minimum taxable
income for this year if the refund constitutes a tax to which (A)(ii)
"applied."
So, backwards in time we go. When we go back to the year in which the
refunded amount was paid, we find that, for purposes of determining the
amount of alternative minimum taxable income we have for that earlier
year, we must apply the treatment "no deduction allowed" to the amount of
that tax payment since it is a payment of state personal income tax and
thus a tax described in paragraph (3) of Section 164(a).
Now, to figure out exactly what's going on with (A)(ii) in this earlier
year, we have to be very nitpicky, punctilious statutory
constructionists.
Sec. 56(b)(1)(A) gives us the general treatment: "no deduction shall be
allowed" but we don't know to what items that treatment applies until we
get to the clauses of (b)(1)(A). Each of clause (i) and (ii) gives us a
separate class of items to which the general treatment of (b)(1)(A) itself
is to be applied.
In other words, clause (i) of subparagraph (A) is applying the general
treatment "no deduction shall be allowed" to the specific items it
enumerates; namely, taxes described in Sec. 164(a)(1)-(3).
Thus, when we go back to the later year of the recovery and stand back and
put it all together, we derive the following conclusion: for the earlier
year in which the amount recovered was paid, subparagraph (A)(ii) applied
to the payment of state income tax the treatment "no deduction shall be
allowed" for purposes of determining the amount of our alternative minimum
taxable income for that earlier year.
Thus, to put it into simpler English, because that payment was a payment
of a tax described in section 164(a)(3), and, as such, subparagraph
(A)(ii) "applied" to that payment and, as a result we were not allowed to
take a deduction for that payment in computing our alternative minimum
taxable income.
What is crucial to notice here is that, if (A)(ii) "applies" to a tax
payment, all it does is prohibit its deduction in the computation of
alternative minimum taxable income. Once a taxpayer has fully computed
the amount of their alternative minimum taxable income, the application of
(A)(ii) to a tax payment is exhausted, it can have no further effect. In
particular, it has no effect on the amount of our ultimate tax liability
for the year in question.
This is so because the only tax liability Sec. 56(b)(1)(D) can have an
effect on is the tentative alternative minimum tax liability. However, if
the regular tax liability is greater than the tentative alternative
minimum tax liability, and recall that (A)(ii) did not apply for purposes
of computing the regular tax, then the tax liability that we ultimately
pay is only the regular tax, because our alternative minimum tax liability
has been reduced from a specified percentage of of our alternative minimum
taxable income down to $0 by virtue of Sec. 55(a), which provides that the
alternative minimum tax liability is the excess (if any) of the tentative
alternative minimum tax over the regular tax.
Thus, it must be the case that Section 56(b)(1)(A)(ii) has "applied" to a
particular tax item for purposes of Sec. 56(b)(1)(D) once it has denied
any deduction for that tax item in the computation of alternative minimum
taxable income, and that the sole necessary and sufficient condition for
excluding a recovery of that tax item in a later year from gross income
under Sec. 56(b)(1)(D) is that no deduction have been allowed with respect
to the recovered amount in the earlier tax year within which that amount
was originally paid.
In particular, the fact that the taxpayer's ultimate tax liability
actually reflected a deduction for that payment - because the taxpayer's
regular tax was greater than the tentative alternative minimum tax - has
absolutely no bearing on whether or not a recovery of that tax can be
excluded from income under Section 56(b)(1)(D).
To reiterate, the only necessary, and the sufficient, precondition for
excluding a tax refund from gross income for AMT purposes is that the
taxpayer's alternative minimum taxable income for the year in which that
tax was paid cannot have reflected a deduction for the amount paid.
Since a taxpayer must compute his alternative minimum taxable income for
every single year, even if the taxpayer never pays any AMT and always pays
only the regular tax liability - after all, you won't know if you owe any
AMT until you determine your alternative minimum taxable income and, from
there, your tentative alternative minimum tax - Sec. 56(b)(1)(A)
necessarily "applies" to the amount of state income taxes you pay each
year, regardless of whether or not your ultimate tax liability does, or
does not, reflect a deduction for those taxes.
In point of fact, the tax benefit rule of Sec. 56(b)(1)(D) is just like
the pre-1986 version of the general tax benefit rule of Sec. 111. Prior
to amendment in 1986, Sec. 111 excluded from gross income any recovery
that did not reduce taxable income for the year in which paid.
However, where a taxpayer either had negative taxable income for the year,
or was subject to the AMT, the taxpayer did not get any sort of a
reduction in his tax liability even though a deduction for the amount
recovered was allowed, and therefore did not really get a tax benefit as
that term was understood in the case law that developed the doctrine.
See, e.g., the Committee Report to P.L. 99-514, 10/22/86).
Thus, a taxpayer might be allowed a deduction for his state income taxes,
but because his gross income was below the exemption amount (aka the 0%
bracket), he got no benefit out of being allowed the deduction.
To remedy this problem, Congress amended Sec. 111 to provide that a
recovery was excluded from gross income to the extent that it did not
reduce the amount of tax imposed by "this chapter" - namely, Code sections
1 to 1400L. So, for regular tax purposes, a recovery is included in
income only to the extent that it reduced any tax imposed by chapter 1,
including both the regular tax (imposed by Section 1) and the AMT (imposed
by Section 55).
By comparison, Sec. 56(b)(1)(D) is a horse of a completely different
colour. Sec. 56(b)(1)(D) excludes a recovery if it was not allowed as a
deduction in determining alternative minimum taxable income for the year
in which it was paid.
It should be obvious by now that the exclusion provisions of Sec. 111 and
Sec. 56(b)(1)(D) operate in very different ways. Sec. 111 excludes a
recovery only to the extent that it did not cause a reduction in the
taxpayer's liability for any tax imposed under chapter 1 of the Code.
Thus, for example, a payment could be recovered that was not itself
deductible for the year in which paid, but which had the effect of
permitting a larger deduction for another amount. To the extent that the
original payment permitted a larger percentage of another item to be
deducted, and thereby reduced the taxpayer's ultimate tax liability, a
recovery of that payment cannot be excluded from income, even if no
deduction was permitted for that item itself in the year in which it was
paid.
By contrast, Sec. 56(b)(1)(D) makes absolutely no reference to whether or
not the amount recovered had any effect on the amount of any tax imposed
on the taxpayer for the year in which the recovered amount was paid. All
that is required for a recovery to be excluded under Sec. 56(b)(1)(D) is
that it not have been allowed as a deduction in determining alternative
minimum taxable income for the year in which it was paid.
Thus, it is entirely within the intent of the statute that, even if a
taxpayer pays $5,000 in state income tax in Year 1, and claims a deduction
for that entire amount, and the entire amount reduces the amount of the
taxpayer's regular tax liability for Year 1, and the taxpayer does not pay
the AMT for Year 1 but only the regular tax, that the full amount of the
taxpayer's $2,000 refund received in Year 2 should be excluded from income
in determining the taxpayer's AMT for Year 2, and that as a result it is
entirely possible that if the taxpayer has to pay the AMT for Year 2, that
the taxpayer will have obtained the full tax benefit of the overpayment in
Year 1 without having had to fully include the refund in income and pay
tax on it in Year 2.
Shyster1040
it wouldn't make any difference in the instructions issued by IRS for
Line 7 on Form 6251 if section 56(b)(1)(D) were changed from stating
D) Treatment of certain recoveries.
No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
included in gross income for purposes of determining alternative
minimum taxable income.
to stating
D) Treatment of certain recoveries.
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income.
Regarding you question about what corner you painted yourself into, its
the DUNCE CORNER.
""
Actually, you fatuous little pr**k, I would object to your proposed
revision of Section 56(b)(1)(D) because it would not replicate the effect
of the current provisions.
Your revision would require the exclusion from gross income for AMT
purposes of refunds of taxes described in Sec. 164(a)(1)-(3) the payment
of which was attributable to the taxpayer's trade or business, and which
were therefore allowed as deductions in computing adjusted gross income.
That is clearly not the intent behind Sec. 56(b)(1)(A)(ii) and (b)(1)(D).
Sec. 56(b)(1)(A)(ii) permits a deduction, for purposes of determining
alternative minimum taxable income, of any tax described in 164(a)(1)-(3)
if that tax was paid as part of carrying on the taxpayer's trade or
business. Thus, if the taxpayer paid state personal property tax on an
automobile that he used 100% in his business, that tax payment would be
allowed as a deduction in computing the taxpayer's adjusted gross income,
and would not be disallowed by Sec. 56(b)(1)(A)(ii) for purposes of
computing the taxpayer's alternative minimum taxable income.
As a result, if the taxpayer received a refund of that state personal
property tax in a later year, the taxpayer should be required to include
that refund in income if he received a tax benefit from it. Pursuant to
Sec. 111, the taxpayer will have to include that refund in gross income to
the extent that the payment reduced any of his tax liabilities for the
year of payment.
As a result, if the payment of the tax was fully reflected in a reduction
in the taxpayer's regular tax liability for the year of payment, or in his
AMT tax liability for the year of payment, Sec. 111 would require the
taxpayer to fully include the recovery in income, and it would therefore
be reflected in the taxpayer's taxable income before personal exemptions
(i.e., his line 41 amount if he itemizes).
However, since determination of alternative minimum taxable income starts
from the taxpayer's taxable income for regular tax purposes, see Sec.
55(b)(2), which already includes the amount of the taxpayer's recovery, it
would be wrong to have Sec. 56(b)(1)(D) cause that recovery to be
excluded, because the amount paid was taken into account for purposes of,
and did reduce, alternative minimum taxable income pursuant to the flush
language of Sec. 56(b)(1)(A)(ii), which provides that (A)(ii) does not
apply to a tax described in 164(a)(1)-(3) if that tax is deductible for
purposes of determining AGI.
Your proposed revision would do precisely that. State personal property
taxes are "described" in Sec. 164(a)(2) without regard to whether they
were attributable to a trade or business or to personal consumption. As a
result, there is no way of determining whether a tax payment was allowed
as a deduction in computing adjusted gross income, a deduction that is
fully allowed for both regular and AMT tax purposes, or was only allowed
as a deduction in computing taxable income, a deduction that is only
allowed for purposes of the regular tax and is not allowed for purposes of
the AMT.
As a result, the taxpayer in my hypothetical would be able to exclude the
full amount of any refund of a business-related tax he paid under your
provision, in flat contradiction to the intent of Congress in enacting
Secs. 56(b)(1)(A)(ii) and 56(b)(1)(D).
In other words, Sec. 56(b)(1)(D) as it stands only permits an exclusion
for recoveries of amounts that were completely disallowed as deductions
for purposes of determining your alternative minimum taxable income for
the year in which paid; your revision would in addition permit the
exclusion for recoveries of amounts that were not completely disallowed as
deductions for purposes of determining your alternative minimum taxable
income.
Thus, I cannot agree with your proposed revision in the least.
Since you think that that is what I've been arguing for in these
interminable posts, then it's quite clear that you haven't the foggiest
idea how to interpret a statute.
KEBSC...@aol.com
On Jan 26, 8:01 pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
> ""Based on your following response, I take it that your position is that
> it wouldn't make any difference in the instructions issued by IRS for
> Line 7 on Form 6251 if section 56(b)(1)(D) were changed from stating
>
> D) Treatment of certain recoveries.
> No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
> included in gross income for purposes of determining alternative
> minimum taxable income.
>
> to stating
>
> D) Treatment of certain recoveries.
> No recovery of any tax to which paragraphs (1), (2), or (3) of section
> 164(a) APPLIED shall be included in gross income for purposes of
> determining alternative minimum taxable income.
>
> Regarding you question about what corner you painted yourself into, its
> the DUNCE CORNER.
> ""
>
> Actually, you fatuous little pr**k, I would object to your proposed
> revision of Section 56(b)(1)(D) because it would not replicate the effect
> of the current provisions.
>
> Your revision would require the exclusion from gross income for AMT
> purposes of refunds of taxes described in Sec. 164(a)(1)-(3) the payment
> of which was attributable to the taxpayer's trade or business, and which
> were therefore allowed as deductions in computing adjusted gross income.
____________________________________________
Shyster1040
SORRY! I DID NOT INTEND TO ELIMINATE THE "FLUSH LANGUAGE" RELATED TO
AMOUNTS ALLOWABLE IN COMPUTING ADJUSTED GROSS INCOME. I HAVE MODIFIED
THE PROPOSED CHANGE FOR SECTION 56(b)(1)(D) TO TRANSFER THE FLUSH
LANGUAGE CONTAINED SUBPRAGRAPH (A)(ii) TO SUBPARAGRAPH D.
THUS THE REVISED PROPOSED CHANGE WOULD BE AS FOLLOWS,
D) Treatment of certain recoveries.
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income. This subparagraph
shall not apply to any amount allowable in computing adjusted gross
income.
NOW, BASED ON THIS NEW PROPOSED REVISION, HOW WOULD IRS CHANGE THE
INSTRUCTION FOR LINE 7 ON FORM 6251 FROM THE CURRENT INSTRUCTION.
>
> That is clearly not the intent behind Sec. 56(b)(1)(A)(ii) and (b)(1)(D).
REALLY?
SINCE YOU CLAIM TO KNOW THE INTENT OF CONGRESS, PLEASE ANSWER THE
FOLLOWING QUESTION. DID CONGRESS INTEND FOR TAXPAYERS TO WHO RECEIVIED
A LIMITED CAPITAL GAINS RATE BASED TAX BENEFIT FROM THE OVERPAYMENT OF
A STATE INCOME TAX ON FORM 1040 SCHEDULE A TO HAVE TO PAY THE REGULAR
TAX ON THAT REFUND IF IT IS RECEIVED IN A YEAR THAT THE REGULAR TAX IS
PAID AFTER HAVING BEEN TAXED AT THE AMT RATE ON THE INCOME USED FOR THE
OVERPAYMENT CLAIMED ON FORM 1040 SCHEDULE A ? THE BENEFIT IS THE
RESULT OF A CAPITAL GAINS BEING TAXED AT 5 PERCENT RATHER THAN 15
PERCENT, NOT THE RESULT OF LESS INCOME BEING TAXED BECAUSE OF THE
DEDUCTION CLAIMED FOR THE OVEPAYMENT. THE BENEFIT IS REVEALED BY
APPLICATION OF THE INSTRUCTIONS IN PUBLICATION 525.
Richard Macdonald
news:1169854094.5...@j27g2000cwj.googlegroups.com...
>
>D) Treatment of certain recoveries.
> No recovery of any tax to which subparagraph (A)(ii) APPLIED
> shall be included in gross income for purposes of determining
> alternative minimum taxable income.
Since AMTI is applied EVERY YEAR, to se if there is any AMT
due and creates a floor below which several credits may not lower
regular tax, the section applies EVERY Year.
Do not confuse application with AMT being paid, Section 56
concerns the computation of Alternative Minimum Taxable
Income only. Either that or you must believe that Taxable
Income is only calculated when there is tax due.
Shyster1040
beginning to see some real opportunities for some low-level tax arbitrage,
particularly involving intentional overpayment of one's estimated state
income tax liabilities, and even more so for this year, given that a
certain amount of long term capital gain will be subject to a 0% tax
rate.
What's most amusing about the 0% rate arbitrage for this year is that
wealthy people cannot take advantage of it; in other words, it's one of
the few tax arbitrage opportunities the Code affords primarily to lower
income folks.
The basic arbitrage (assuming very simple items, and not taking into
account phaseouts and threshholds) goes like this: First, you need to
have ordinary taxable income under the threshhold for the 25% marginal
bracket - at least several thousand under for good effect ($2k to $7k is
the range I played around with). Next, you need to have some long term
capital gains somewheres from about $5,000 minimum and up. Finally, you
need to make sure that your state income taxes will be overpaid by
approximately $2,000 to about $4,000 (those were the numbers that
generated significantly high returns on "investment;" however, if you
don't mind a lower percentage return on "investment" but want a bigger
dollar return, the overpayment can go up to about $7,000 to $8,000).
Using a spreadsheet, and with admittedly a very simplified return, I was
able to show net tax savings of up to 10% of the amount of the overpayment
of state taxes. In particular, I should note that this is essentially
free money, you don't get taxed on the net tax savings you realize by
overpaying your state taxes in '07 and including the refund in income in
'08. As a result, the maximum return of 10% is an after-tax return, so
for comparison to equivalent taxable investments you could have put that
money into if you hadn't lent it to your state government for a year, you
need to gross up the net tax savings by the amount of additional tax you
would have paid had the "investment" generated taxable income (e.g., a
one-year CD paying interest). On a grossed-up basis, the best effective
pre-tax return I found was about 12.26% on a $4,000 overpayment with
ordinary taxable income of about $29,000 (keep in mind, ordinary taxable
income is gross non-long-term-capital-gain income, less all deductions and
exemptions other than the tax overpayment in question - as a result, this
amount of taxable income, for a single person, represents about $35,000 of
gross ordinary income).
In other words, to beat the return on investment that you will get if you
lend a couple thousand extra dollars to your local state government this
year, you would have to find either a taxable investment that paid a
return of at least 12.26%, or a tax-exempt investment that paid at least
10%. Last time I checked, muni-bonds weren't paying that high a return,
and to get 12.26% on corporate bonds you've got to go significantly below
investment grade.
Considering that the state governments' default rates on repaying state
income tax refunds is generally at an investment grade level, this is
definitely an "investment" to look into.
Furthermore, the returns discussed above implicitly assume an investment
over an entire year; however, you don't have to overpay your state income
taxes in January '07 in order to get this return. So long as the
overpayment is made during '07, you will get the same dollar return.
That being the case, the potential annualized returns from making the
overpayment late in '07, and then filing your state income tax return
immediately after the end of '07, will be much greater.
For example, assume that you make the overpayment on Dec 1, 07, and that
you get your state refund back on April 1, 08, That means that you held
your "investment" for 4 months. Thus, on the numbers I discussed above,
you would have gotten a 12.26% return on a 4-month investment of $4,000.
Assuming no compounding on investment returns, that's equal to a simple
annualized return of 36.78%.
Finally, while you will have to take the eventual additional federal tax
into account in making estimated tax payments during '08, since there is
generally no estimated tax underpayment penalty if your underpayment was
less than $1,000, you will most likely not have to pay much if any of the
additional federal tax due on the refund amount that you have to include
in income for 08 until the end of 08. In fact, based on the numbers I
used, the additional tax due for 08 on account of the refund would be
about $690, which is under the estimated tax underpayment penalty
threshhold; meaning that it's entirely possible that you wouldn't have to
pay that additional tax until April 15, 2008.
So, again using the numbers I discussed above, if you made your
overpayment on Dec. 1 of 07, filed your state and federal tax returns as
soon as possible, and received your federal and state refunds for 07 by
April 1, 2008, you would have your original $4,000, plus a federal refund
of about $1,000. That $5,000 could then be invested in a more hum-drum
investment, like a 1-year CD or one of the online-only money market
accounts that pay around 5%. If the money stayed in for a year, that
would net you another $250 pre-tax (about $215 after-tax, based on the
effective tax rates applicable to the income numbers I've been using).
Then, no later than April 10th (to be safe) 2009, you would withdraw $690
or so from that investment to pay the additional federal income tax due
for the refund of the intentional overpayment you received in 08.
As a result of lending $4,000 to your state government for 4 months, by
April 15th, 2009 you would have net after-tax cash in hand profit of about
$615. That works out to an after-tax return on "investment" of about
15.38%. In this case, you let your investment run from 12/1/07 to
4/15/09, or about 17 months, so on an annualized basis, you've received an
after-tax return of about 10.85%, which corresponds to a gross-up pre-tax
return of about 12.5%.
Now I ask you, what bank, fund manager, or investment partnership is going
to give a regular Joe, who earns about $35,000 a year and has some
appreciated stock investments tucked away, that kind of return on a $4,000
investment? You're getting hedge-fund type returns for IRA type
investments.
Shyster1040
The "intent" of Congress is as available to you as it is to me, if only
you'd bother to actually read the statute and the committee reports (i.e.,
the legislative history).
So, it being understood that the "intent" of Congress is quite clearly
discernable from the statute and the legislative history, the answer to
your question regarding whether Congress "intended" for there to be a
mismatch between the dollar value of the initial tax benefit, whether
direct or indirect, derived from the overpayment of a state income tax,
and the dollar value of the eventual inclusion of the refund of that
overpayment in income, the obvious answer is: either Congress intended
that to happen, or else Congress did not care that it would happen.
The fact of the matter is that even under the old case law tax benefit
doctrine there was never a requirement that the dollar value of the
initial tax benefit be matched by the dollar value of the additional tax
paid on receipt of a recovery, other than in a single case that was
promptly overruled. For example, in Alice Phelan Sullivan Corp. v. U.S.,
381 F.2d 399 (Ct. Cl. 1967), the taxpayer deducted an overpayment when the
corporate rate was around 15% and was required to include the recovery in
income when the corporate rate was about 40%. The taxpayer claimed that
it should not have to include the full amount of the recovery in income
because to do that would be to overtax it on the amount of the recovery.
However, to do that would be to convert a tax system that was designed to
be an annual system into a transactional system where no income was taxed
until the entire transaction (or, most likely, death in the case of
individuals) was complete. Since that would be clearly contrary to the
intent of Congress as demonstrated by the fact that it expressly enacted
an annual tax system, the court in Alice Phelan held that rate
differentials between the years in question were irrelevant so long as the
taxpayer derived some sort of a benefit from the earlier tax deduction.
The issue you keep harping on is precisely that sort of issue. It's
irrelevant whether the tax benefit comes directly because the taxpayer got
to deduct the overpayment from ordinary income taxed at ordinary rates, or
whether it comes indirectly because the deduction resulted in more of the
taxpayer's capital gains being taxed at the 5% rate rather than at the 15%
rate.
That problem happens even if the AMT is never involved, so the fact that
it also occurs when the AMT is involved is completely irrelevant.
Your basic problem is that you have gotten completely hung up on an issue
that has already been specifically addressed, that Congress must have been
aware of, both because they have scads of legislative counsel researching
court cases that affect tax matters, and because they have accountants who
can run the numbers and demonstrate that the tax benefit system, both
within the regular tax itself and also in the interaction between the
regular tax and the AMT, will result in mismatches between the dollar
value of the original tax benefit and the dollar value of the eventual
additional tax due.
Why don't you first sit down and read Alice Phelan Sullivan Corp. and the
cases it refers to, and then read the available legislative history
regarding Sec. 111 and Sec. 56(b)(1)(D), and then come back and perhaps we
can have a more informed discussion about whether or not Congress
"intended" for the dollar value mismatches that occur on account of the
tax benefit rule, particularly when the mismatch occurs between a regular
tax year and an AMT year.
KEBSC...@aol.com
On Jan 26, 11:52�pm, "Richard Macdonald" <rmacdon...@verizon.net>
wrote:
> <KEBSCHU...@aol.com> continued to flagelate the necrotic equine in messagenews:1169854094.5...@j27g2000cwj.googlegroups.com...
>
>
>
> >D) Treatment of certain recoveries.
> > No recovery of any tax to which subparagraph (A)(ii) APPLIED
> > shall be included in gross income for purposes of determining
> > alternative minimum taxable income.Since AMTI is applied EVERY YEAR, to se if there is any AMT
> due and creates a floor below which several credits may not lower
> regular tax, the section applies EVERY Year.
lil dickey:
SO WHERE IS THE PARAGRAPH IN SECTION 56 THAT CORRESPOND TO SECTION
56(b)(1)(D) WHICH WOULD EXCLUDE FROM THE CALCULATION OF AMTI
RECOVERIES OF ITEMIZED MISCELLANEOUS EXPENSE DEDUCTIONS TAKEN IN PRIOR
YEARS WHEN ONLY THE REGULAR TAX WAS PAID ?
IN FOOTBALL TERMS, YOU JUST GOT DECLEATED.
CHEERS,
WDK
KEBSC...@aol.com
On Jan 27, 1:46?am, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
> Just keep on coming with the snide little remarks sh*t-face.
>
> The "intent" of Congress is as available to you as it is to me, if only
> you'd bother to actually read the statute and the committee reports (i.e.,
> the legislative history).
>
> So, it being understood that the "intent" of Congress is quite clearly
> discernable from the statute .....
Shyster 1040:
IF IT IS SO CLEAR FROM THE STATUTE, WHERE IS THE PARAGRAPH IN SECTION
56, CORRESPONDING TO SECTION 56(b)(1)(D) WHICH IS APPLICABLE TO TAX
REFUNDS) THAT WOULD EXCLUDE FROM THE CALCULATION OF AMTI RECOVERIES OF
ITEMIZED MISCELLANEOUS EXPENSE DEDUCTIONS TAKEN IN PRIOR YEARS WHEN
ONLY THE REGULAR TAX WAS PAID ?
HERE ARE SECTIONS 56(b)(1)(A)(i) AND 56(b)(1)(A)(ii).
b) Adjustments applicable to individuals
In determining the amount of the alternative minimum taxable income of
any taxpayer (other than a corporation), the following treatment shall
apply (in lieu of the treatment applicable for purposes of computing
the regular tax):
(1) Limitation on deductions
(A) In general
No deduction shall be allowed -
(i) for any miscellaneous itemized deduction (as defined in section
67(b)), or
(ii) for any taxes described in paragraph (1), (2), or (3) of
section 164(a). Clause (ii) shall not apply to any amount allowable in
computing adjusted gross income.
IN FOOTBALL TERMS, YOU JUST GOT DECLEATED.
FLUSHED
> Your basic problem is that you have gotten completely hung up on an issue
> that has already been specifically addressed, that Congress must have been
> aware of, both because they have scads of legislative counsel researching
> court cases that affect tax matters, and because they have accountants who
> can run the numbers and demonstrate that the tax benefit system, both
> within the regular tax itself and also in the interaction between the
> regular tax and the AMT, will result in mismatches between the dollar
> value of the original tax benefit and the dollar value of the eventual
> additional tax due.
I ASKED DICK ARMEY FACE-TO-FACE (YOU DO REMEMBER HIM DON'T YOU) ABOUT
THE INCLUSION OF TAX REFUNDS IN THE CALCULATION OF TAXABLE SOCIAL
SECURITY BENEFITS. HE RESPONDED, "I AM NOT FAMILIAR WITH THAT DETAIL"
AND THEN SCURRIED OFF.
>
> Why don't you first sit down and read Alice Phelan Sullivan Corp. and the
> cases it refers to, and then read the available legislative history
> regarding Sec. 111 and Sec. 56(b)(1)(D), and then come back and perhaps we
> can have a more informed discussion about whether or not Congress
> "intended" for the dollar value mismatches that occur on account of the
> tax benefit rule, particularly when the mismatch occurs between a regular
> tax year and an AMT year.
WHY DON'T YOU GET A CLUE?
CHEERS,
WDK
KEBSC...@aol.com
On Jan 27, 1:25�am, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
I REMAIN SKEPTICAL. SHOW ME THE NUMBERS.
CHEERS,
WDK
Richard Macdonald
news:1169921085.0...@s48g2000cws.googlegroups.com...
On Jan 26, 11:52?pm, "Richard Macdonald" <rmacdon...@verizon.net>
wrote:
>> <KEBSCHU...@aol.com> continued to flagelate the necrotic equine in
>> >messagenews:1169854094.5...@j27g2000cwj.googlegroups.com...
>>
>> >D) Treatment of certain recoveries.
>> > No recovery of any tax to which subparagraph (A)(ii) APPLIED
>> > shall be included in gross income for purposes of determining
>> > alternative minimum taxable income.Since AMTI is applied EVERY YEAR, to
>> > se if there is any AMT
>> due and creates a floor below which several credits may not lower
>> regular tax, the section applies EVERY Year.
>
>lil dickey:
You are STILL bemoaning ntures cruel loke on you when you look in the
mirror.
> SO WHERE IS THE PARAGRAPH IN SECTION 56 THAT CORRESPOND
> TO SECTION 56(b)(1)(D) WHICH WOULD EXCLUDE FROM THE
> CALCULATION OF AMTI RECOVERIES OF ITEMIZED
> MISCELLANEOUS EXPENSE DEDUCTIONS TAKEN IN PRIOR
> YEARS WHEN ONLY THE REGULAR TAX WAS PAID ?
If CONGRESS did not put one there, then Congress CHOSE not
to put on there, which stil does not change that CONGRESS did
put in 56(b)(1)(A)(ii) and (D), which apply EVERY year.
KEBSC...@aol.com
On Jan 27, 4:06�pm, "Richard Macdonald" <rmacdon...@verizon.net>
wrote:
> <KEBSCHU...@aol.com> wrote in messagenews:1169921085.0...@s48g2000cws.googlegroups.com...
>
> On Jan 26, 11:52?pm, "Richard Macdonald" <rmacdon...@verizon.net>
> wrote:
>
> >> <KEBSCHU...@aol.com> continued to flagelate the necrotic equine in
> >> >messagenews:1169854094.5...@j27g2000cwj.googlegroups.com...
>
> >> >D) Treatment of certain recoveries.
> >> > No recovery of any tax to which subparagraph (A)(ii) APPLIED
> >> > shall be included in gross income for purposes of determining
> >> > alternative minimum taxable income.Since AMTI is applied EVERY YEAR, to
> >> > se if there is any AMT
> >> due and creates a floor below which several credits may not lower
> >> regular tax, the section applies EVERY Year.
>
> >lil dickey:You are STILL bemoaning ntures cruel loke on you when you look in the
> mirror.
>
> > SO WHERE IS THE PARAGRAPH IN SECTION 56 THAT CORRESPOND
> > TO SECTION 56(b)(1)(D) WHICH WOULD EXCLUDE FROM THE
> > CALCULATION OF AMTI RECOVERIES OF ITEMIZED
> > MISCELLANEOUS EXPENSE DEDUCTIONS TAKEN IN PRIOR
> > YEARS WHEN ONLY THE REGULAR TAX WAS PAID ?If CONGRESS did not put one there, then Congress CHOSE not
> to put on there, which stil does not change that CONGRESS did
> put in 56(b)(1)(A)(ii) and (D), which apply EVERY year.
>
>
>
> >> Do not confuse application with AMT being paid, Section 56
> >> concerns the computation of Alternative Minimum Taxable
> >> Income only. Either that or you must believe that Taxable
> >> Income is only calculated when there is tax due.- Hide quoted text -- Show quoted text -
lil' dickey:
YEAH, AND YOU STOP CONFUSING A FIGAMENT OF YOUR IMAGINATION WITH THE
REALITY DEFINED IN SECTION 56(b)(1)(D).
AND BTW, YOU REALLY NEED TO DO SOMETHING ABOUT THAT SNOT BUBBLE! YOUR
LITTLE GAME IS OVER.
CHEERS,
WDK
Shyster1040
56(b)(1)(D) WHICH WOULD EXCLUDE FROM THE CALCULATION OF AMTI=20
RECOVERIES OF ITEMIZED MISCELLANEOUS EXPENSE DEDUCTIONS TAKEN IN PRIOR=20
YEARS WHEN ONLY THE REGULAR TAX WAS PAID ?
""
Why should there have to be one? Congress obviously decided that
recoveries of miscellaneous itemized deductions, as opposed to taxes, did
not deserve to get a blanket exemption from the AMT. Instead, the general
rule of Sec. 111 applies - to the extent that an itemized miscellaneous
deduction did not reduce the taxpayer's liability for any tax imposed
under chapter 1 of the Code, that item will not be included in gross
income in the first place. Any portion that did result in a reduction in
tax, will be included.
It is undoubtedly due to the fact that the original impetus for the AMT
was Congressional concern that too many rich people were unfairly reducing
their taxable income, and thus their tax liability, by claiming inflated
miscellaneous itemized deductions.
Miscellaneous itemized deductions can be managed and manipulated in a way
that taxes cannot (taxes can be intentionally overpaid, but generally not
by too much before the IRS has grounds to deny the payment as a voluntary
payment rather than an imposition of tax). Undoubtedly many in Congress
probably felt that most tax overpayments were more likely to be legitimate
mistakes or, like the federal wage withholding system, the result of
intentional withholding on the part of the state imposing the tax.
On the other hand, giving a blanket exemption to miscellanous itemized
deductions would just invite endless tax arbitrage as taxpayers maneuvered
their affairs in order to make intentional overpayments in one year to the
point where their deductions are maximized but their regular tax liability
is just a few dollars more than their tentative AMT liability, and then
recover all of those intentional overpayments are tax-free income in a
subsequent year when they could, again, maneuver their affairs so that
they were subject to the AMT.
You really need to get over this obsession with the fact that Congress
didn't enact the statute you think they should have and learn to deal with
the statute Congress actually enacted.
Shyster1040
You've obviously got access to a computer, so set up a spreadsheet and run
some numbers yourself if you're skeptical. That's what any good group of
scientists would do if one of their number claimed results they doubted.
As an example of the numbers I managed to get, I set up the following:
ordinary taxable income (gross net of deductions, other than the
intentional state tax overpayment): $29,000
net long term capital gains: $10,000
intentional overpayment of state tax: $4,000
I used the tax schedule for a single filer, and inflated the bracket
threshholds by the same ratio of the 2007 thresholds to the 2006
threshholds. Thus, for example, the 25% threshhold I used for 2008 was
$33,096.98 (yes, I know they round to the closed $50; I didn't feel like
being that persnickety).
I also did not concern myself with phaseouts, threshholds and the like for
deductions. In other words, my taxpayer had only two types of deductions,
those allowed in computing AGI, and state income taxes.
Based on these assumptions and the numbers I used, in the absence of the
intentional overpayment the tax due on the ordinary income was $3,958.75,
yielding an effective tax rate of 13.65%. With the intentional
overpayment, the tax due on the ordinary income dropped to $3,358.75,
yielding an effective rate of 13.44% and a tax savings of $$600.
The tax on the capital gains was $1,215 without, and $815 with, the
intentional overpayment, yielding effective rates of 12.15% and 8.15%
respectively, and a tax savings of $400.
As a result, the total tax savings for 2007 derived from the intentional
overpayment of state income tax was $1,000, yielding an aggregate
effective tax rate of 11.93% as compared to 13.27% without the
overpayment.
For 2008 I used the same amount of ordinary taxable income - $29,000 - and
a long term capital gains amount of $0. I played with the numbers and
discovered that my setup is extraordinarily sensitive to the amount of
LTCG in 2008, so it would be best to minimize those as completely as
possible. In fact, it appears to be the case that the net tax savings
completely disappears if the amount of LTCG in 2008 is equal to or greater
than the intentional overpayment made in 2007 - that may be an artifact of
my simplified system, but it does indicate the necessity for being able to
actively minimize 2008 LTCG for the tax arbitrage to work.
Without the overpayment, total tax in 2008 was $3,944.50, and with the
overpayment (i.e., with the refund included as additional ordinary income
for 2008) total tax was $4,544.50. The effective rates were 13.6% and
13.77%, respectively, and the total additional tax cost was $600.
Thus, the net benefit of the scheme is $1,000, less $600, equals $400. In
other words, by "investing" $4,000 dollars with your state government by
making them a "loan" via an intentional overpayment in 2007, you end up
having $400 more at the end of 2008 than you would otherwise have had.
Further, you get the upside first, before you have to pay the downside,
which gives you even more free money to invest over the period between
when you get your federal refund for 2007 and when you have to make your
final payment of federal tax for 2008 without penalty or interest.
On top of that, there's a further arbitrage because you get to defer
paying the down-side for a year after you actually close out the "loan" to
the state.
If you make the overpayment in late 2007, and then promptly file your
state income tax return as soon as possible (unless you've got really
funky withholding or a lot of different income sources, you could probably
use the YTD amounts on your last paycheck stub to complete the return by
Jan 1 of 2008 and have it filed) you will get your state tax refund in the
early part of 2008. However, while you will have to include that refund
as income in 2008, you won't have to pay the tax liability on it until
April 15th, 2009, when you file your return for 2008 and include final
payment of your taxes for 2008. Since the additional tax due to the
refund of the overpayment is less than $1,000, there should be no penalty
for underpayment of estimated taxes if all of your usual taxes are paid
through withholding from your paycheck.
In other words, it's like buying a 17-month CD from a bank where the deal
is, the bank will up-front pay you an amount equal to the interest the CD
will ultimately earn, plus an extra 60% of that amount, the bank will then
let you withdraw your deposit after only 4 months, and won't ask you to
return that extra 60% until another 13 months later, and all without
charging you any interest for the use of that extra money in the
meantime.
Once you get your refund of the overpayment back, you could either do with
the money whatever else you were going to do with it 4 months earlier, or,
if you wanted to maximize the return on the game, invest that $4,000 along
with the $1,000 of free money you have in a 1-year CD to pick up some
extra money. Of course that additional income will be taxed for 2008 as
well (a fact I took into account in my model).
In my model, I invested the $4,000 refund of the overpayment plus the
$1,000 from the 2007 federal refund for 13 months in an online direct
banking money market account (those typically pay about 5% p.a. right
now). That investment returned $250 in interest income, or $215 net of
the additional tax liability for 2008 on account of that interest income
(although, to be perfectly accurate, only about 2/3 of that interest
should have been taxed in '08, since the account was held from March 08 to
April 09, 1/3 would in reality be taxed in 09 and not 08).
Thus, by April 15, 2009, the net return on the $4,000 intentional
overpayment made on Dec. 1, 2007, was, net of taxes, $615. That's not a
half-bad return for a 17-month investment of $4,000, considering that
there was almost no risk of loss involved.
Of course, you could take this arbitrage one better if you could arrange
to be subject to the AMT instead of the regular tax for 2008, provided you
don't boost your tax liability too much. In that case, you would get to
exclude the entire $4,000 refund of the overpayment from gross income for
purposes of your federal tax for 2008 and, so long as your AMT liability
was less than $600, you would earn even more on your "investment" in the
intentional overpayment. E.g., suppose that your AMT liability for 2008
ended up being $115 (i.e., your tentative AMT exceeded your regular tax by
$115), in that case, you would add another $485 to the return on your
"investment," bringing your total return as of 4/15/09 to $615 + $415 =
$1,100. That is an after-tax return of 27.5% on your initial $4,000
investment, or an annualized return of (12/17)*27.5% = 19.41%.
To get that same annualized return out of a taxable investment, e.g., a
mutual fund, assuming that your total effective tax rate for 2008 was
about 13.8% (see above), you would have to get a pre-tax annual return of
22.52%. However, just remember that there's a substantial risk of loss in
a mutual fund, whereas the certainty of getting your $4,000 overpayment
back is better than most investment grade bonds.
Shyster1040
FLUSHED
""
B.S. The only thing getting flushed is your maniacal obsession with the
belief that Congress really meant to enact the statute you want rather
than the statute they did, and your paranoid delusion that the IRS is
hiding this from us with "fraudulent" instructions.
The fact is, there is no equivalent exclusion for recoveries of
miscellaneous itemized deductions under the AMT, and there is no earthly
reason why there should be if Congress decided that there shouldn't -
which is what Congress evidently decided, since they didn't enact an
exclusion for recoveries of MIDs.
Why they didn't is a matter of policy you should take up with the
Congressmen who originally drafted the statute, or better yet, with
someone at the Joint Committee who would actually have a good
understanding of the policy behind that differential treatment.
My own take on it is that, since the whole impetus for the AMT originally
was to prevent rich people from unfairly lowering their tax liabilities by
abusing the miscellaneous itemized deductions, Congress intended to impose
a minimum amount of tax on the income that was used to incur miscellaneous
itemized deductions, and permitting a blanket exclusion for recoveries of
those amounts would defeat that purpose.
With respect to taxes, I'm not entirely sure why the itemized deduction
for taxes is denied in the first place since tax payments are, typically,
neither under the sole control of the taxpayer nor capable of being
grossly overpaid (i.e., in order to claim an excessive deduction) - in
other words, I'm not really sure why Congress would lump state and local
taxes together with the classic tax preferences that were (supposedly)
being abused by the rich.
That being said, I'm not entirely sure if the reason for giving a blanket
exclusion for tax refunds is necessarily the best policy either.
I suspect that it's probably more the result of the fact that the AMT was
supposed to run as a completely separate tax system, keeping track of tax
items in a manner completely separate from the regular tax. As a result,
it is probably the case that Congress wanted to prevent any game playing
with state tax overpayments by denying any deduction for such payments,
but wasn't so concerned about rich people using such payments to engage in
massive tax arbitrage, as well as a legitimate concern with the fact that
the states, like the federal government, typically overwithholds from
wages to make sure that a sufficient amount of tax is paid, and that
therefore a lot of low and middle income people would get double-taxed on
tax refunds received for overpayments that they had no choice in making.
The same concern does not arise with most of the other miscellaneous
itemized deductions. First, MIDs are much easier to manipulate than state
tax payments are, and for much bigger amounts. Second, to the extent that
a taxpayer does not actually obtain any tax benefit from a MID, a portion
of any recovery of that MID will be excluded from gross income under Sec.
111 in any event, both for regular tax and AMT purposes. Thus, because
Sec. 111 is implicitly incorporated into the AMT tax base, MID recoveries
are not double-taxed at a 100% basis under the AMT. However, since the
original impetus of the AMT was to stop the (supposed) abuse of the MIDs,
giving a blanket exemption for any recoveries thereof would substantially
defeat the purpose of the AMT - in other words, the very unrefined message
of the AMT is: if you're stupid enough to overpay your MID expenses, then
we're essentially going to implicitly presume you did so for tax avoidance
purposes, and we're going to give you a bit of a slap on the hand for it.
Shyster1040
REALITY DEFINED IN SECTION 56(b)(1)(D).
""
What "reality" is that, dildo? The only one getting confused here is you:
(a) you've confused the difference between applying a Code provision for
purposes of determining AMTI and for purposes of determining actual tax
liability, and (b) you've confused the statute Congress actually enacted
with the statute you think they really should have enacted, and you can't
seem to get over the temerity of the fact that no-one else thinks that
Congress really passed your version of the statute rather than the version
they actually passed.
KEBSC...@aol.com
On Jan 27, 4:43�pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
GO CLEAN UP THAT SNOT BUBBLE. IT IS NOT A VERY PRETTY SIGHT.
AND OH YEAH, I WAS WRONG ABOUT THAT MFS REQUIREMENT IN NORTH CAROLINA
FOR YEARS PRIOR TO 2006. FUNNY HOW THAT GOT FIXED AFTER I WEIGHED
IN. NOT ONLY DID THE NC STATUTE NOT PROVIDE FOR THE MFS REQUIREMENT,
THE REQUIREMENT WAS IN VIOLATION OF THE PRIVILEGES AND IMMUNITY CLAUSE
IN THE US CONSTITUTION. THE FACT THAT THE NC STATUTE WAS CHANGED TO
SECIFICALLY PROVIDE FOR THE MFJ STATUS, IT WAS ONLY DONE TO MAKE THE
LAW STUPID PROOF FOR SOME BUFFOONS AT THE NCDOR. WHY DON'T YOU CHECK
OUT HOW MANY ACCCOUNTANT TYPES RECOGNIZED THE MFS INSTRUCTIONS WAS
BOGUS AND VIOLATED THE US CONSTITUTION BACK IN 2000.
CHEERS,
WDK
Shyster1040
AND OH YEAH, I WAS WRONG ABOUT THAT MFS REQUIREMENT IN NORTH CAROLINA=20
FOR YEARS PRIOR TO 2006. FUNNY HOW THAT GOT FIXED AFTER I WEIGHED=20
IN. NOT ONLY DID THE NC STATUTE NOT PROVIDE FOR THE MFS REQUIREMENT,=20
THE REQUIREMENT WAS IN VIOLATION OF THE PRIVILEGES AND IMMUNITY CLAUSE=20
IN THE US CONSTITUTION. THE FACT THAT THE NC STATUTE WAS CHANGED TO=20
SECIFICALLY PROVIDE FOR THE MFJ STATUS, IT WAS ONLY DONE TO MAKE THE=20
LAW STUPID PROOF FOR SOME BUFFOONS AT THE NCDOR. WHY DON'T YOU CHECK=20
OUT HOW MANY ACCCOUNTANT TYPES RECOGNIZED THE MFS INSTRUCTIONS WAS=20
BOGUS AND VIOLATED THE US CONSTITUTION BACK IN 2000.
""
Not only are you a sore loser, you can't even mouth off to the right
poster - I don't know anything about NC's filing status requirements and
have never said word one about them. As such, whether you did, or did
not, recognize that the NC filing requirement was invalid (as to your
actual knowledge - who knows? I wasn't there) is irrelevant to the
question of whether or not you understand how the AMT works (which you
clearly do not).
Paul Thomas
He's getting a tad ticked off, or so it looks from all his yelling and ALL
CAP usage.
--
Shyster1040
- at the very least ignorance gets you all worked up and elevates the
blood pressure.
Shyster1040
for why you're wrong about the effect of Sec. 56(b)(1)(D).
As far as I can see, your position is that Sec. 56(b)(1)(D) only applies
to recoveries of taxes that were paid in a prior year when the AMT
actually applied, and the deduction for that tax payment was in fact
denied in determining the taxpayer's actual tax liability. In other
words, Sec. 56(b)(1)(D) only applies, on what I believe is your argument,
to the recovery of a tax that was paid in a year when the taxpayer had an
AMT liability because his tentative alternative minimum tax exceeded his
regular tax.
In other words, your position is apparently, as characterized above, that
the word "applied" in Sec. 56(b)(1)(D) means "applied with the result that
the taxpayer paid AMT on top of his regular tax." Thus, if the taxpayer's
tentative alternative minimum tax was less than his regular tax, Sec.
56(b)(1)(A)(ii) would not have "applied" to any taxes paid by the taxpayer
because that section did not result in an increase to the taxpayer's tax
liability over and above his regular tax liability.
The problem with that position is that it violates one of the basic canons
of statutory construction - the rule against interpreting a statute to
render one of its provisions meaningless or without effect. That is
precisely what your interpretation of Sec. 56(b)(1)(D) does - it renders
Sec. 56(b)(1)(D) a meaningless provision with no effect.
The reason for this is that under Sec. 55, alternative minimum taxable
income is the taxpayer's taxable income, with the specific adjustments
provided for in that section. Thus, unless the AMT rules provide
otherwise, all of the normal rules of the regular tax apply to the
determination of alternative minimum taxable income. Specifically, in
this case Sec. 111.
Under Sec. 111, a recovery is excluded from income for the year of receipt
"to the extent that" it did not reduce the taxpayer's liability for any
tax imposed under chapter 1. If, for a given year, a taxpayer paid an
amount of AMT in addition to the regular tax because his tentative
alternative minimum tax was greater than his regular tax, the taxpayer
would have received no tax benefit at all from any deduction for taxes
described in Sec. 164(a)(1)-(3) that wasn't allowed in computing AGI. As
a result, any recovery of such a tax in a later year would be completely
excluded from gross income solely by virtue of Sec. 111 and, as a result,
Sec. 56(b)(1)(D) could have no further effect since there would be nothing
left for Sec. 56(b)(1)(D) to exclude from gross income (like with
deductions, you only get to exclude an item once, even if multiple
applicable provisions allow an exclusion).
For example, suppose that in Year 1 TP paid $10,000 in state income tax
but, because TP owed AMT that year, he did not receive any benefit from a
deduction for that amount.
If, in Year 2 TP gets a refund of $2,000 on his Year 1 state income taxes,
that refund would be fully excluded from gross income pursuant to Sec. 111
because none of that payment caused a reduction in any tax imposed on TP
under chapter 1 of the Code for Year 1. As a result, TP would not need to
rely on Sec. 56(b)(1)(D) to exclude that recovery because it was already
fully excluded under Sec. 111.
To put it simply, under your interpretation of Sec. 56(b)(1)(D), that
section cannot have any effect - it would be a nullity because it would
only exclude that which had already been excluded by Sec. 111.
As a result, it must be the case that the word "applied" in Sec.
56(b)(1)(D) only refers to whether, under Sec. 56(b)(1)(A)(ii), a
deduction was disallowed solely for purposes of computing the taxpayer's
alternative minimum taxable income, without regard to whether or not that
disallowance had any effect on the taxpayer's ultimate tax liability.
That is the interpretation the instructions to line 7 of Form 6521 give to
Sec. 56(b)(1)(D), and it must therefore be the case that not only are
those instructions not fraudulent, they are in fact perfectly correct.
KEBSC...@aol.com
On Jan 28, 1:51�pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
Shyster1040:
Your and your buddy lil' paulie are nothing more than government kool-
aid drinking IRS sycophants who would say sh*t about IRS misconduct
even if you had a mouth full of it.
You said, "I don't know anything about NC's filing status
requirements". The fact that you have now admited that you are
IGNORANT is at least a start.
That NC MFS requirement was in place since at least tax tear 1996
before the requirement was eliminated for 2006. I wonder why "tax
professionals" didn't speak-up publicly during those ten years. Could
it be because they are CLUELESS or maybe they are just SPINELESS.
It appears from your prior post that you don't understand the
difference between an adjustment and a tax preference item under the
AMT.
BTW, you are the LOSER on this issue.
Cheers,
WDK
KEBSC...@aol.com
More comments from the PEANUT GALLERY in, where else, Georgia.
Paul Thomas, CPA
<KEBSC...@aol.com> wrote
> Your and your buddy lil' paulie are nothing more than government
> kool-aid drinking IRS sycophants who would say sh*t about IRS
> misconduct even if you had a mouth full of it.
>
> You said, "I don't know anything about NC's filing status
> requirements". The fact that you have now admited that
> you are IGNORANT is at least a start.
>
> That NC MFS requirement was in place since at least tax tear 1996
"tax tear"..........spoken by someone with a mouthfull of shit.
--
Paul Thomas, CPA
paultho...@bellsouth.net
KEBSC...@aol.com
On Jan 28, 6:36?pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
> Apparently the old adage about what you don't know can't hurt you is wrong
> - at the very least ignorance gets you all worked up and elevates the
> blood pressure.
Shyster 1040:
Mark Twain left a message for you.
It ain't what you don't know that gets you into trouble. It's what you
know for sure that just ain't so.
And you are in big trouble!
Cheers,
WDK
Shyster1040
relevance to the topic under discussion, namely the AMT and how to
construe Sec. 56(b)(1)(D) of the Code.
I am perfectly happy to grant, for the sake of discussing the AMT, that
you were point-man on the discovery that NC's filing status requirement
was unconstitutional, and that you were a brilliant hero who saved all the
NC residents who had non-resident spouses a ton of money - kudos to you.
However, that fact is perfectly irrelevant to the discussion of the AMT -
remember, even a stopped watch tells the correct time twice a day.
What matters is the strength of your argument that Sec. 56(b)(1)(D) is
only supposed to have an effect, i.e., to exclude a refund, if the payment
to which that refund relates was actually disallowed under Sec.
56(b)(1)(A)(ii) and that such disallowance had the result of increasing
the taxpayer's tax liability above what it otherwise was under the regular
tax system.
That argument is indefensible, primarily because it renders Sec.
56(b)(1)(D) nugatory and meaningless, and therefore violates the very
basic canon of statutory construction that every provision in a statute
must be construed to give that provision some effect.
Your argument concerning Sec. 56(b)(1)(D) is wrong because it completely
ignores the provision of Sec. 55 that alternative minimum taxable income
("AMTI") is computed in the same manner as regular taxable income, with
the specific adjustments and changes provided for in Secs. 56-59. Since
Sec. 111 is part and parcel of the rules for computing taxable income
under the regular tax, it also comes into play in computing AMTI in the
same manner as it does in computing regular taxable income, except as
otherwise modified by Secs. 56-59.
Under Sec. 111, if a deduction for a tax payment was fully disallowed
under Sec. 56(b)(1)(A)(ii) and, as a consequence, the taxpayer's tax
liability was increased - meaning the taxpayer had an AMT liability that
was greater than $0 because his tentative alternative minimum tax, which
is a percentage of his AMTI, was greater than his regular tax - then any
refund of that tax payment is fully excluded under Sec. 111, both for
purposes of the regular tax and the AMT, because the taxpayer received
absolutely no tax benefit from that payment.
As a result, since Sec. 111 is already sufficient unto itself to fully
exclude any refund of a tax payment that was completely disallowed as a
deduction under Sec. 56(b)(1)(A)(ii) and, as a result, generated a
non-zero AMT liability, there would be nothing left for Sec. 56(b)(1)(D)
to accomplish if Sec. 56(b)(1)(D) were limited to excluding refunds only
in those cases where the taxpayer had to pay the AMT in addition to the
regular tax for the year in which the original tax payment was made.
Thus, it must be the case that Sec. 56(b)(1)(D) excludes a tax refund, for
purposes of determining AMTI, regardless of whether the tax payment to
which such refund relates did, or did not, actually produce a tax benefit
for the year in which the payment was originally made; any other
construction of Sec. 56(b)(1)(D) renders it meaningless.
Thus, since your argument concerning Sec. 56(b)(1)(D) renders that same
section meaningless, your argument must be wrong unless there is no other
way to construe that section; however, there is another perfectly
legitimate way to construe Sec. 56(b)(1)(D), namely that it complements
Sec. 111 and operates to exclude any tax refund for AMTI purposes,
regardless of whether the payment to which it relates generated a tax
benefit. Since there is a reasonable alternative to treating Sec.
56(b)(1)(D) as mere surplusage, it follows that your argument necessarily
fails.
Thus, if you want the IRS to change the instructions to line 7 of Form
6521, you're going to have to lobby Congress to change the law, because as
things stand, those instructions are perfectly correct.
Shyster1040
You have yet to provide even a scintilla of evidence, boy. Apparently
the
one who "knows" that which "just ain't so" is thee, not me.
KEBSC...@aol.com
On Jan 29, 11:25?am, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
> I also don't give a damn about the NC filing status issue - it has ZERO
> relevance to the topic under discussion, namely the AMT and how to
> construe Sec. 56(b)(1)(D) of the Code.
>
> I am perfectly happy to grant, for the sake of discussing the AMT, that
> you were point-man on the discovery that NC's filing status requirement
> was unconstitutional, and that you were a brilliant hero who saved all the
> NC residents who had non-resident spouses a ton of money - kudos to you.
>
> However, that fact is perfectly irrelevant to the discussion of the AMT -
> remember, even a stopped watch tells the correct time twice a day.
>
> What matters is the strength of your argument that Sec. 56(b)(1)(D) is
> only supposed to have an effect, i.e., to exclude a refund, if the payment
> to which that refund relates was actually disallowed under Sec.
> 56(b)(1)(A)(ii) and that such disallowance had the result of increasing
> the taxpayer's tax liability above what it otherwise was under the regular
> tax system.
>
> That argument is indefensible, primarily because it renders Sec.
> 56(b)(1)(D) nugatory and meaningless, and therefore violates the very
> basic canon of statutory construction that every provision in a statute
> must be construed to give that provision some effect.
Shyster1040:
Geez, how many times do I have tell you that there can be a long-term
capital gains rate based tax benefit in a year the AMT is paid if the
tax overpayment causes more of the capital gains to be taxed at 5
percent and less at 15 percent. This benefit is uncovered by the
instructions in IRS Publication 525.
If Congress intended to exclude refunds that provided a tax benefit in
a year that the regular tax was paid from the calculation of AMTI,
section 56(b)(1)(D) would state ,
D) Treatment of certain recoveries.
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income. This subparagraph
shall not apply to any amount allowable in computing adjusted gross
income.
rather than,
D) Treatment of certain recoveries.
No recovery of any tax to which subparagraph (A)(ii) APPLIED shall be
included in gross income for purposes of determining alternative
minimum taxable income.
And then there is the problem with IRS instructions that produce
DOUBLE TAXATION when there was a limited long-term capital gains rate
based tax benefit in a year the AMT was paid and the regular tax is
paid in the refund year. The income used for the ovepayment is taxed
at the AMT rate and the refund is taxed at the regular tax rate
because IRS is CLUELESS REGARDING limitations imposed by Section
111(a) beyond detemining the amounts to be entered on Line 10 and 21.
CONTRARY TO IRS INSTRUCTIONS, THE CALCULATION OF EVERY ELEMENT THAT
CONTRIBUTES TO THE DETERMINATION OF TAXES PAID IS IMPACTED BY SECTION
111(a) WHEN THERE IS A ITEMIZED DEDUCTION RECOVERY. IN OTHER WORDS,
ITEMIZED DEDUCTION RECOVERIES ARE NOT INCLUDED IN AGI OR A DERIVITIVE
OF AGI WHEN DETERMINING TAXABLE SOCIAL SECURITY, ITEMIZED DEDUCTIONS,
EXEMPTIONS, CREDITS, EXCLUSIONS ETC.
Here is some more from Mark Twain:
"God made the Idiot for practice, and then He made the IRS." O.K. I
made a slight, but fully appropriate, change under the circumstances.
"It is better to keep your mouth closed and let people think you are a
fool than to open it and remove all doubt."
and
"Denial ain't just a river in Egypt."
You just got a new SNOT BUBBLE. Now go clean it up.
Your failure to deal with the above makes the makes your conclusions
from your arguments nothing but nonsense.
Cheers,
WDK
SNIP
Shyster1040
capital gains rate based tax benefit in a year the AMT is paid if the
tax overpayment causes more of the capital gains to be taxed at 5
percent and less at 15 percent. This benefit is uncovered by the
instructions in IRS Publication 525.
If Congress intended to exclude refunds that provided a tax benefit in
a year that the regular tax was paid from the calculation of AMTI,
section 56(b)(1)(D) would state ,
D) Treatment of certain recoveries.
No recovery of any tax to which paragraphs (1), (2), or (3) of section
164(a) APPLIED shall be included in gross income for purposes of
determining alternative minimum taxable income. This subparagraph
shall not apply to any amount allowable in computing adjusted gross
income.
""
Absolutely not. Worse yet, you're so damned st**id you don't even realize
how st**id you are.
First, yes, I quite agree that there can be indirect as well as direct tax
benefits from being able to deduct an overpayment of a tax described in
Sec. 164(a)(1)-(3) in the circumstance where a taxpayer pays the regular
tax only in the year of the overpayment and pays the AMT in addition to
the regular tax in the year of receipt of a refund of that overpayment.
However, I completely disagree that Congress in any way, shape, or form
intended for this indirect benefit to be taken into account under Sec.
56(b)(1)(D).
Congressional intent can only be discerned from (a) the text of the
statute itself, and the ends that it obviously aims at achieving by means
of that text, and (b) available committee reports and the Joint
Committee's blue book report on tax legislation.
Since none of these sources indicate that such was Congress' intent, I
cannot fathom where you think you are getting that intent from - the lint
in your belly-button, perhaps?
Second, you're so blitheringly incompetent at reading statutes that you
cannot even see the invalidity of your argument after its been pointed out
to you directly.
So, let's try again, very slowly.
1) A taxpayer only pays an amount of alternative minimum tax ("AMT") if
his tentative alternative minimum tax ("TAMT") is greater than his regular
tax, and then the AMT is equal to the excess, if any, of the TAMT over the
regular tax. Otherwise, the taxpayer's AMT is $0. Sec. 55(a)-(b).
2) TAMT is determined in the same manner as taxable income for regular tax
purposes, but with certain modifications and adjustments made. Sec.
55(b)(2).
3) For every single tax year, if a taxpayer is subject to the regular tax,
that taxpayer is subject to the AMT. Sec. 55(b)(2)(flush language).
4) As a result of Sec. 55(b)(2), Sec. 111 applies for the purpose of
computing AMTI and, as a result, if a taxpayer receives a refund of any
tax that was paid in an earlier year, then, to the extent that the
original payment did not result in a reduction of the taxpayer's liability
for any tax, including both the regular tax and the AMT, imposed under
chapter 1 of the Code, that refund is excluded from gross income, both for
purposes of the regular tax and for purposes of the AMT.
5) Thus, because Sec. 111 by its own force and effect, excludes from gross
income that portion of a refund that did not produce a tax benefit,
whether under the regular tax or the AMT, Sec. 56(b)(1)(D) cannot be
intended to merely replicate the same result.
For example, suppose TP paid the AMT in Year 1 because his TAMT exceeded
his regular tax. That means that TP was not permitted to claim any
deductions for his payment of Year 1 state income tax.
Now, suppose TP gets a refund of $300 of Year 1 state income tax in Year
2. In determining his taxable income AND his AMTI, Sec. 111 will apply,
and will result in the entire amount being excluded from gross income
because the original payment in Year 1 did not reduce TP's liability for
any tax under chapter 1 in Year 1. Sec. 111 is clearly intended to work
in this manner, both as a matter of statutory constuction and as
explicitly stated in the committee reports to the 1986 Tax Reform
legislation.
As a result, for purposes of the AMT, that refund has already been fully
excluded from TP's gross income pursuant to Sec. 111, and there is
therefore nothing further that can be excluded under your version of Sec.
56(b)(1)(D). Your version of Sec. 56(b)(1)(D) would, therefore, be an
empty exercise in legislating.
However, that conclusion violates the very basic canon of statutory
construction that gives a meaning to every word in a statute if at all
possible, unless the only available meaning so horribly tortures the
statute that no reasonable person could ever agree that such a meaning was
intended - i.e., something along the lines of having to conclude that
"rescusitate" means "cut off his head with a rusty saw."
6) There is a perfectly reasonable alternative to your tortured version
of Sec. 56(b)(1)(D), namely, that it excludes any refund of any tax that
is allowed, for regular tax purposes, solely as an itemized deduction, and
that it excludes such a refund regardless of whether or not the original
payment of that refunded amount created a tax benefit.
The reason for this is that there is no necessary connection between the
fact that Sec. 56(b)(1)(A)(ii) "applied" to a tax payment and the
taxpayer's ultimate total tax liability for the year of that tax payment.
This is the case because Sec. 56(b) ONLY applies for purposes of
determining AMTI, and does not necessarily apply for purposes of
determining AMT, which is equal to $0 if TAMT is less than or equal to the
regular tax. See Sec. 55(b)(1)(A).
Thus, because the AMT provisions of Sec. 55 apply for each and every year
for which the taxpayer is subject to the regular tax, Sec. 55(b)(2)(flush
language), Sec. 56(b)(1)(A)(ii) "applies" to any payment of tax for each
and every year in which the taxpayer is subject to the regular tax, and it
does so regardless of whether the taxpayer's ultimate total tax liability
is determined solely under Sec. 1, or under Sec. 1 and Sec. 55(b)(1)(A)
together.
This follows for the very simple reason that, if a taxpayer is "subject
to" the AMT, he must necessarily compute his AMTI, and as a result, must
necessarily "apply" Sec. 56(b)(1)(A)(ii) to his tax payments, without
regard to whether or not he must ultimately pay some non-zero amount of
AMT.
7) Thus, since your version of Sec. 56(b)(1)(D) renders that section
impotent, because Sec. 111 already accomplishes the purpose you're
attempting to impose on Sec. 56(b)(1)(D), and because there is another
perfectly reasonable interpretation that both comports with the literal
language of the statute and gives Sec. 56(b)(1)(D) independent
significance in the statutory frame-work of the AMT, your interpretation
of Sec. 56(b)(1)(D) is WRONG.
As mentioned above, your interpretation of Sec. 56(b)(1)(D) is palpably
WRONG because it renders that section mere surplusage - enacted provisions
that cannot, under any circumstances, have any independent legal
consequences - and this is so regardless of the fact that excluding all
refunds for purposes of the AMT regardless of the existence or
nonexistence of a tax benefit, results in certain people getting an
indirect tax benefit because the deduction of the refunded tax in the
original year of payment increases the amount of long term capital gain
that is taxed at only 5% instead of 10%, and doesn't result in any
corresponding offset in the year of refund (in which, if the taxpayer had
more long term capital gain, the inclusion of the refund would result in
less of that gain being taxed at 5%, and more being taxed at 15%).
As to the limitations imposed by Section 111, you are so off the mark that
you're not even wrong, to paraphrase Wolfgang Pauli. The committee
reports to Sec. 111 and the case-law under which the tax benefit rule was
developed (which case law was only partly codified by Sec. 111) make it
quite clear that the amount to be excluded from income is that amount
which, for the original year of payment, caused a reduction in the
taxpayer's tax liability, determined by computing that amount of such
payment that could have been disallowed without causing an increase in the
taxpayer's actual tax liability for the year of payment.
Under Sec. 111, as a general rule, the taxpayer's taxable income for the
year of original payment is only recalculated if the taxpayer "had no
taxable income in the prior year or was subject to the alternative minimum
tax or had credits that reduced their tax liability to zero." See the
relevant committee report to the 1986 Tax Reform Act, P.L. 99-514,
10/22/86.
In all other circumstances, Congress intended "individual taxpayers
receiving refunds of State and local income taxes must continue to follow
the procedure set forth by the IRS to determine whether their refund
should be included in income. This procedure involves a comparison of the
refund amount with the amount by which the taxpayer's itemized deductions
for the prior year exceeded the zero bracket amount (standard deduction).
The lesser of the two amounts is included in income in the current year.
This simple procedure, effectively, produces a result comparable to that
obtained by the more complicated recomputation of the taxpayer's tax
liability for the prior year." See the 1986 TRA committee report.
Thus, if a taxpayer paid the regular tax alone for the year in which an
amount of state income tax was paid, and later receives a refund of that
state tax, the amount of the refund is, in general, included in income
only to the extent that the taxpayer's itemized deductions for the year of
payment, less the amount of the refund, exceed the taxpayer's standard
deduction. Any part of the refund that, together with the other itemized
deductions, does not exceed the standard deduction, is not included in
income.
Notice, Congress in general doesn't give a fig about the issue of whether
the deduction created an indirect benefit by reducing the amount of
capital gains subject to 15% and increasing the amount subject to 5%, or
about any other indirect tax benefit (e.g., an effect on the amount of an
allowed credit, provided that the taxpayer's liability wasn't reduced to
$0 by the allowed credits).
The only time when the taxpayer's taxable income has to be recomputed for
the year in which the refunded overpayment was made is where the taxpayer
was subject to the AMT, had taxable income less than $0, or had credits
that exceeded the tax liability. In these cases, and as Congress clearly
indicated in the committee report to the 1984 amendments to Sec. 111, the
taxable income has to be recomputed to determine the extent to which the
refunded item caused a reduction in the taxpayer's tax liability for that
year. The reason being that, under the case law tax benefit principle,
some courts had held that taxpayers had received a tax benefit for the
year of payment even though, as a result of all of their deductions
together, they had taxable income that was less than $0, or they were
subject to the AMT. In either case, the courts had held that the
deduction had been "allowed" for regular tax purposes, and that therefore
it was irrelevant that the overpaid amount had not actually caused a
reduction in the taxpayer's tax liability (because, in the case of
negative income, the tax is $0, no matter how negative the income, and in
the case of the AMT, the deduction was only disallowed for AMT purposes,
not for regular tax purposes, and that, if the deduction had been
disallowed for regular tax purposes the taxpayer's tax liability under the
regular tax would have been higher than it was under the AMT, and that
therefore the taxpayer had received a tax benefit, even though, as a
technical matter, the deduction was disallowed for AMT purposes).
To conclude, there is absolutely no indication that Congress intended to
tax the indirect tax benefit you describe (if it even thought about it),
and your attempted construction of Sec. 56(b)(1)(D) tortures that
provision into impotence because there is nothing that Sec. 56(b)(1)(D),
as interpreted by you, can carry out that is not already fully completed
under Sec. 111.
KEBSC...@aol.com
On Jan 29, 3:00�pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
NOT SO FAST COWBOY!
WHY DON'T YOU JUST QUOTE THE REGULATION THAT SPECIFICALLY SUPPORTS
IRS'S TORTURED INPRETATION OF SECTION 56(b)(1)(D). COULD IT BE THAT NO
SUCH REGULATION EXISTS ????????
WITHOUT A REGULATION, THAT BRINGS US BACK TO WHERE I ENTER THIS
THREAD.
FROM MESSAGE 20 IN THIS THREAD.
Coloring Outside the Lines:
Examining Treasury's (Lack of) Compliance with Administrative
Procedure
Act Rulemaking Requirements, 82 Notre Dame L. Rev. ___ (2007), on
SSRN.
Here is the link to the abstract:
http://taxprof.typepad.com/taxprof_blog/2007/01/
hickman_on_trea.html#...
I DO BELIEVE THAT I SEE ANOTHER SNOT BUBBLE FORMING.
WITHOUT A REGULATION SUPPORTING IRS'S INTERPRETATION, THERE IS NO NEED
TO RESPOND TOTHE NONSENSE WOVEN INTO THE REMAINDER OF YOUR MESSAGE.
CHEERS,
WDK
> the deduction created an ...
>
> read more »
Shyster1040
and that no provision of the Code can have any effect unless there's a
regulation for that Code provision?
Otherwise, you're just being a sore loser, because nothing I have said so
far depends on the existence or interpretation of a regulation; on the
contrary, everything I have said is merely a reasonable interpretation of
the language of the statute itself, as informed by the Congressional
intent revealed in the applicable committee reports.
By contrast, your "interpretation" of Sec. 56(b)(1)(D) is per se
unreasonable because it renders that section inoperable - Sec. 111 already
accomplishes the task that you want to limit Sec. 56(b)(1)(D) to, and,
since Sec. 111 itself applies to the AMT, Sec. 56(b)(1)(D) as
"interpreted" by you would not add anything to the computation.
In short, what you've done is to render Sec. 56(b)(1)(D) mere surplusage,
in violation of the basic canons of statutory construction.
Since you can't seem to absorb even the simplest of concepts unless it's
explained ad nauseam, let's try once again.
First, Sec. 111 excludes from gross income, for BOTH AMT and regular tax
purposes, any recovery of a state tax that did not have the effect of
reducing the taxpayer's tax liability for ANY tax, including the AMT and
the regular tax, in the year in which paid.
As a result, if a taxpayer obtains a tax benefit OF ANY SORT on account of
a state tax payment because the taxpayer was only liable for the regular
tax in the year of payment, any refund of that state tax will be included
in gross income, for BOTH regular tax and AMT purposes, "to the extent"
that all or a portion of the refunded amount contributed to the tax
benefit.
Second, SOLELY for purposes of determining alternative minimum taxable
income ("AMTI"), Sec. 56(b)(1)(A)(ii) disallows any itemized deduction for
state taxes.
Third, SOLELY for purposes of determining AMTI, Sec. 56(b)(1)(D) excludes
from gross income any refund of a tax to which Sec. 56(b)(1)(A)(ii)
"applied."
Fourth, if a taxpayer is subject to the regular tax in a particular year,
then that same taxpayer is also subject to the AMT. Sec. 55(b)(2)(flush
language).
Fifth, because a taxpayer subject to the regular tax is also, SOLELY by
that very fact alone, ALSO subject to the AMT, that taxpayer MUST
determine if he owes any AMT in addition to the regular tax.
Sixth, because a taxpayer subject to the regular tax for a given year MUST
determine his AMT liability, that taxpayer MUST compute his AMTI.
Seventh, because a taxpayer subject to the regular tax for a given year
MUST compute his AMTI for that year, that taxpayer MUST apply Sec.
56(b)(1)(A)(ii) to any tax paid during that year.
Eighth, a person is "subject to" a tax if that person is obligated to pay
the amount of such tax due and is subject to adverse consequences if that
amount is greater than $0 and the person does not pay. It does not mean
that the person must have paid something more than $0; otherwise, any
person whose expenses exceeded his income for the year would not be
"subject to" the income tax, and that is clearly not the case.
Ninth, thus, SOLELY by virtue of being required to compute his regular tax
liability for a given year and to pay any computed amount greater than $0
over to the U.S. Treasury, a taxpayer is "subject to" the AMT for that
same year, and is therefore required to pay any amount of AMT greater than
$0.
Tenth, thus, SOLELY by virtue of being "subject to" the regular tax for a
given year, the taxpayer MUST "apply" Sec. 56(b)(1)(A)(ii) to any payment
of state tax he made in that given year or, to put it more directly, Sec.
56(b)(1)(A)(ii) APPLIES to any state taxes paid by the taxpayer for that
given year.
Eleventh, unless the taxpayer's tentative alternative minimum tax ("TAMT")
exceeds the taxpayer's regular tax, the taxpayer's AMT liability is $0;
otherwise, that liability is the excess of the TAMT over the regular tax.
Twelfth, thus, as a matter of simple statutory construction, Sec.
56(b)(1)(A)(ii) APPLIES to a state tax payment made in a given year SOLELY
by virtue of the fact that the taxpayer is also "subject to" the regular
tax. In no event does the applicability of Sec. 56(b)(1)(A)(ii) depend on
the taxpayer having an AMT liability greater than $0; all that is
necessary is that the taxpayer be required to calculate his AMTI because
he is "subject to" the AMT, which happens SOLELY by virtue of the taxpayer
being "subject to" the regular tax.
As a matter of simple logic, even if the taxpayer ends up with an AMT
liability of $0, it MUST have been the case that Sec. 56(b)(1)(A)(ii)
APPLIED to any state taxes the taxpayer paid in any year, because the only
way that a taxpayer can ultimately determine that his AMT liability is $0,
is by determining that his TAMT is less than his regular tax, which he can
only do by computing his AMTI.
In short, the only way in which Sec. 56(b)(1)(A)(ii) does NOT APPLY to a
state tax payment is if the taxpayer is NOT "subject to" the AMT; but that
only happens if the taxpayer is ALSO not subject to the regular tax, in
which case the taxpayer is, generally, not subject to any US income tax.
Thirteenth, Sec. 56(b)(1)(D) provides that "[n]o recovery of any tax to
which subparagraph (A)(ii) applied shall be included in gross income for
purposes of determining alternative minimum taxable income."
Fourteenth, as detailed above, for any year, if a taxpayer was "subject
to" the regular tax, then Sec. 56(b)(1)(A)(ii) APPLIED to the taxpayer's
payments of state taxes, regardless of whether the taxpayer's AMT
liability was $0 or an amount equal to the (non-zero) excess of TAMT over
regular tax.
Fifteenth, since Sec. 56(b)(1)(A)(ii) APPLIED to state taxes in any year
in which the taxpayer was "subject to" the regular tax, any refund of
those taxes received in a later year is excluded from gross income for
purposes of computing AMTI SOLELY because the taxpayer was "subject to"
the regular tax in the year those taxes were paid, REGARDLESS OF WHETHER
HIS AMT LIABILITY WAS $0 OR SOME OTHER AMOUNT.
Conclusion, if a taxpayer was "subject to" the regular tax for a year in
which the taxpayer made a payment of state taxes, then any refund of those
state taxes are excluded from gross income for purposes of the AMT,
regardless of whether the taxpayer's AMT liability for the year of payment
was $0 or some other non-zero amount.
Now, as a procedural matter, the taxpayer could do one of two things in
computing his AMTI: he could either start with his already-determined
regular taxable income and simply subtract from that amount any tax
refunds he was originally required to include in gross income under Sec.
111 for regular tax purposes, or else he could add back that part of the
refund that was excluded under Sec. 111 for regular tax purposes, and then
subtract the full amount of those self-same tax refunds from gross income
for AMT purposes.
The second way is an inefficient waste of time, so one would expect that
the first way would generally be used by taxpayers.
Now, let's examine those putatively "fraudulent" instructions for line 7
of Form 6251.
The instructions for line 7 of the 2006 Form 6251 state, in full: "Include
any refund from Form 1040, line 10 (or Form 1040NR, line 11), that is
attributable to state or local income taxes. Also include any refunds
received in 2006 and included in income on Form 1040, line 21, that are
attributable to state or local personal property taxes or general sales
taxes, foreign income taxes, or state, local, or foreign real property
taxes. If you include an amount from Form 1040, line 21, you must enter a
description and the amount next to the entry space for line 7. For
example, if you include a refund of real property taxes, enter “real
property” and the amount next to the entry space."
What do those instructions do? Because Form 6251 begins its calculation
with the amount the taxpayer reported on line 38 (if not itemizing) or
line 41 (if itemizing) of Form 1040, the amount reported on line 1 of Form
6251 already includes the portion of any state tax refund that was not
excluded from gross income under Sec. 111. That portion is reported on
line 10 (or in some circumstances, line 21) of Form 1040 as a positive
amount, and thus increases the amount reported on line 38 or line 41 of
Form 1040.
Thus, in order to comply with the statutory mandate of Sec. 56(b)(1)(D),
the instructions take the more efficient approach and simply deduct from
regular taxable the remaining portion of any refund that was required to
be included in income by Sec. 111 and reported on line 10 or 21 of Form
1040 in order to arrive at AMTI.
Thus, after the instructions of line 7 to Form 6251 are followed, the
taxpayer reaches the position mandated by Sec.56(b)(1)(D), namely, all
refunds of taxes paid in earlier years in which the taxpayer was "subject
to" regular tax are excluded from gross income for purposes of determining
AMTI.
Now, what part of that do you not understand? It's pure simple statutory
application, with only the minimal amount of necessary statutory
interpretation (largely limited to ascertaining the dictionary definitions
of words and applying basic grammatical structure).
That is what the statute does. Sec. 56(b)(1)(D) excludes from income ANY
refund of a tax described in Sec. 164(a)(1)-(3) if the original payment of
that tax was disallowed as a deduction under Sec. 56(b)(1)(A)(ii).
And, before you say "But Sec. 56(b)(1)(D) doesn't say that it excludes any
refund of a tax described in Sec. 164(a)(1)-(3)" AGAIN, let me point out a
subtle little nuance of Sec. 56(b)(1)(D), as written, that would not occur
if Sec. 56(b)(1)(D) were re-written in that form.
That nuance is the fact that any refund that Sec. 56(b)(1)(D) excludes
must have been paid in an earlier year when the taxpayer was "subject to"
the regular tax. In other words, if the taxpayer was not "subject to" the
regular tax when he paid an amount of state, local, or foreign tax, then
he cannot exclude any later refund of that tax. This has two practical
effects: first, parents cannot attempt to shift assets to children
tax-free by making a massive state tax payment on behalf of the child
before the child is emancipated and then have the child receive the refund
tax-free for AMT purposes, and, more importantly, it prevents nonresident
foreigners from manipulating the exclusion provision by making large
overpayments of foreign taxes, and receiving a foreign tax benefit, in
years in which they are nonresidents and then getting that money back
tax-free when they are U.S. residents subject only to US income tax (many
other countries use a territorial tax system instead of the worldwide
system with foreign tax credits used by the US).
If, however, Sec. 56(b)(1)(D) merely provided that refunds of taxes
described in Sec. 164(a)(1)-(3) were excluded for AMT purposes, the tax
evasions described above would be possible.
So, once again you are completely wrong. My interpretation of the statute
is not tantamount to saying that Sec. 56(b)(1)(D) is the same thing as
simply excluding refunds of any taxes described in Sec. 164(a)(1)-(3).
Face it dips**t, you're a loser; in fact, you're so damn dumb that you
can't even realize that simple fact until it's been rubbed into your
wall-eyed face several thousand times.
KEBSC...@aol.com
On Jan 29, 10:25 pm, "Shyster1040" <Shyster1...@nospamhotmail.com>
wrote:
> Are you seriously suggesting that Code provisions are not self-executing,
> and that no provision of the Code can have any effect unless there's a
> regulation for that Code provision?
>
> Otherwise, you're just being a sore loser, because nothing I have said so
> far depends on the existence or interpretation of a regulation; on the
> contrary, everything I have said is merely a reasonable interpretation of
> the language of the statute itself, as informed by the Congressional
> intent revealed in the applicable committee reports.
BULL.SH*T.
>
> By contrast, your "interpretation" of Sec. 56(b)(1)(D) is per se
> unreasonable because it renders that section inoperable - Sec. 111 already
> accomplishes the task that you want to limit Sec. 56(b)(1)(D) to, and,
> since Sec. 111 itself applies to the AMT, Sec. 56(b)(1)(D) as
> "interpreted" by you would not add anything to the computation.
M.S.
WITHOUT SECTION 56(b)(1)(D), SECTION 111(a) AS INTERPRETED BY IRS
WOULD LEAD TO DOUBLE TAXATION OF A REFUND OF AN OVERPAYMENT THAT
PRODUCED A LIMITED CAPITAL GAINS RATE BASED TAX BENEFIT IN A PRIOR
YEAR IF THE AMT IS PAID IN BOTH YEAR.
>
> In short, what you've done is to render Sec. 56(b)(1)(D) mere surplusage,
> in violation of the basic canons of statutory construction.
>
WHAT YOU HAVE DONE IS HAULED OFF AND SMACK THE TARBABY.AND YOU ARE NOW
STUCK.
> Since you can't seem to absorb even the simplest of concepts unless it's
> explained ad nauseam, let's try once again.
>
> First, Sec. 111 excludes from gross income, for BOTH AMT and regular tax
> purposes, any recovery of a state tax that did not have the effect of
> reducing the taxpayer's tax liability for ANY tax, including the AMT and
> the regular tax, in the year in which paid.
>
> As a result, if a taxpayer obtains a tax benefit OF ANY SORT on account of
> a state tax payment because the taxpayer was only liable for the regular
> tax in the year of payment, any refund of that state tax will be included
> in gross income, for BOTH regular tax and AMT purposes, "to the extent"
> that all or a portion of the refunded amount contributed to the tax
> benefit.
>
> Second, SOLELY for purposes of determining alternative minimum taxable
> income ("AMTI"), Sec. 56(b)(1)(A)(ii) disallows any itemized deduction for
> state taxes.
BUT THERE CAN STILL BE A LONG-TER CAPITAL GAINS RATE BASED TAX BENEFIT
FROM A TAX OVERPAYMENT CLAIMED ON SCHEDULE A WHEN THE AMT IS ACTUALLY
PAID.
>
> Third, SOLELY for purposes of determining AMTI, Sec. 56(b)(1)(D) excludes
> from gross income any refund of a tax to which Sec. 56(b)(1)(A)(ii)
> "applied."
WHICH REQUIRES PAYMENT OF THE AMT IN THE YEAR OF THE TAX OVERPAYMENT.
>
> Fourth, if a taxpayer is subject to the regular tax in a particular year,
> then that same taxpayer is also subject to the AMT. Sec. 55(b)(2)(flush
> language).
IRRELEVANT TO SUBJECT UNDER DISCUSSION.
BTW, WASN'T IT SEC.55(b)(3) THAT REQUIRED CONGRESSIONAL ACTION BECAUSE
INCREASING A DEDUCTION INCREASED TOTALTAXES WHEN THE AMT WAS PAID.
>
> Fifth, because a taxpayer subject to the regular tax is also, SOLELY by
> that very fact alone, ALSO subject to the AMT, that taxpayer MUST
> determine if he owes any AMT in addition to the regular tax.
SO WHAT?
>
> Sixth, because a taxpayer subject to the regular tax for a given year MUST
> determine his AMT liability, that taxpayer MUST compute his AMTI.
SO WHAT?
>
> Seventh, because a taxpayer subject to the regular tax for a given year
> MUST compute his AMTI for that year, that taxpayer MUST apply Sec.
> 56(b)(1)(A)(ii) to any tax paid during that year.
BUT WHEN THE REGULAR TAX IS PAID, IT WAS SECTION 164(a) THAT APPLIED
TO THE TAX OVERPAYMENT THAT WAS OVERPAID AND PERMITED THE TAX BENEFIT,
NOT SECTION 56(B)(1)(a)(ii).
>
> Eighth, a person is "subject to" a tax if that person is obligated to pay
> the amount of such tax due and is subject to adverse consequences if that
> amount is greater than $0 and the person does not pay. It does not mean
> that the person must have paid something more than $0; otherwise, any
> person whose expenses exceeded his income for the year would not be
> "subject to" the income tax, and that is clearly not the case.
IRRELEVANT TO ISSUE UNDER DISCUSSION.
>
> Ninth, thus, SOLELY by virtue of being required to compute his regular tax
> liability for a given year and to pay any computed amount greater than $0
> over to the U.S. Treasury, a taxpayer is "subject to" the AMT for that
> same year, and is therefore required to pay any amount of AMT greater than
> $0.
>
IRRELEVANT TO THE ISSUE UNDER DISCUSSION.
> Tenth, thus, SOLELY by virtue of being "subject to" the regular tax for a
> given year, the taxpayer MUST "apply" Sec. 56(b)(1)(A)(ii) to any payment
> of state tax he made in that given year or, to put it more directly, Sec.
> 56(b)(1)(A)(ii) APPLIES to any state taxes paid by the taxpayer for that given year.
BUT WHEN ONLY THE REGULAR TAX WAS PAID IT WAS SECTION 164(a), NOT
SECTION 56(b)(1)(a)(ii) THAT APPLIED TO THE TAX OVERPAYMENT THAT WAS
REFUNDED.
>
> Eleventh, unless the taxpayer's tentative alternative minimum tax ("TAMT")
> exceeds the taxpayer's regular tax, the taxpayer's AMT liability is $0;
> otherwise, that liability is the excess of the TAMT over the regular tax.
SO?
>
> Twelfth, thus, as a matter of simple statutory construction, Sec.
> 56(b)(1)(A)(ii) APPLIES to a state tax payment made in a given year SOLELY
> by virtue of the fact that the taxpayer is also "subject to" the regular
> tax. In no event does the applicability of Sec. 56(b)(1)(A)(ii) depend on
> the taxpayer having an AMT liability greater than $0; all that is
> necessary is that the taxpayer be required to calculate his AMTI because
> he is "subject to" the AMT, which happens SOLELY by virtue of the taxpayer
> being "subject to" the regular tax.
B. S. YOU REALLY ARE A SHYSTER, AREN'T YOU!
>
> As a matter of simple logic, even if the taxpayer ends up with an AMT
> liability of $0, it MUST have been the case that Sec. 56(b)(1)(A)(ii)
> APPLIED to any state taxes the taxpayer paid in any year, because the only
> way that a taxpayer can ultimately determine that his AMT liability is $0,
> is by determining that his TAMT is less than his regular tax, which he can
> only do by computing his AMTI.
YEAH ! REALLY SIMPLE LOGIC. SO SIMPLE THAT IT SI DEFECTIVE.
>
> In short, the only way in which Sec. 56(b)(1)(A)(ii) does NOT APPLY to a
> state tax payment is if the taxpayer is NOT "subject to" the AMT; but that
> only happens if the taxpayer is ALSO not subject to the regular tax, in
> which case the taxpayer is, generally, not subject to any US income tax.
DON'T LEAVE ANY STONE UNTURNED!
>
> Thirteenth, Sec. 56(b)(1)(D) provides that "[n]o recovery of any tax to
> which subparagraph (A)(ii) applied shall be included in gross income for
> purposes of determining alternative minimum taxable income."
TO BAD IRS IGNORES THAT VERY STRAIGHT FORWARD LANGUAGE.
>
> Fourteenth, as detailed above, for any year, if a taxpayer was "subject
> to" the regular tax, then Sec. 56(b)(1)(A)(ii) APPLIED to the taxpayer's
> payments of state taxes, regardless of whether the taxpayer's AMT
> liability was $0 or an amount equal to the (non-zero) excess of TAMT over
> regular tax.
BUT SEC. 56(b)(1)(A)(ii) DID NOT APPLY TO THE TAX OVERPAYMENTS
THAT PRODUCED THE TAX BENEFIT WHEN THE REGULAR TAX WAS PAID. SEC
164(a) APPLIED.
>
> Fifteenth, since Sec. 56(b)(1)(A)(ii) APPLIED to state taxes in any year
> in which the taxpayer was "subject to" the regular tax, any refund of
> those taxes received in a later year is excluded from gross income for
> purposes of computing AMTI SOLELY because the taxpayer was "subject to"
> the regular tax in the year those taxes were paid, REGARDLESS OF WHETHER
> HIS AMT LIABILITY WAS $0 OR SOME OTHER AMOUNT.
>
B.S.
> Conclusion, if a taxpayer was "subject to" the regular tax for a year in
> which the taxpayer made a payment of state taxes, then any refund of those
> state taxes are excluded from gross income for purposes of the AMT,
> regardless of whether the taxpayer's AMT liability for the year of payment
> was $0 or some other non-zero amount.
B.S.
> that tax was disallowed as a deduction under Sec. 56(b)(1)(A)(ii) WHEN THE AMT WAS PAID
>
> And, before you say "But Sec. 56(b)(1)(D) doesn't say that it excludes any
> refund of a tax described in Sec. 164(a)(1)-(3)" AGAIN, let me point out a
> subtle little nuance of Sec. 56(b)(1)(D), as written, that would not occur
> if Sec. 56(b)(1)(D) were re-written in that form.
Cheers,
WDK
>
KEBSC...@aol.com
>
> And, before you say "But Sec. 56(b)(1)(D) doesn't say that it excludes any
> refund of a tax described in Sec. 164(a)(1)-(3)" AGAIN, let me point out a
> subtle little nuance of Sec. 56(b)(1)(D), as written, that would not occur
> if Sec. 56(b)(1)(D) were re-written in that form.
>
> That nuance is the fact that any refund that Sec. 56(b)(1)(D) excludes
> must have been paid in an earlier year when the taxpayer was "subject to"
> the regular tax. In other words, if the taxpayer was not "subject to" the
> regular tax when he paid an amount of state, local, or foreign tax, then
> he cannot exclude any later refund of that tax. This has two practical
> effects: first, parents cannot attempt to shift assets to children
> tax-free by making a massive state tax payment on behalf of the child
> before the child is emancipated and then have the child receive the refund
> tax-free for AMT purposes, and, more importantly, it prevents nonresident
> foreigners from manipulating the exclusion provision by making large
> overpayments of foreign taxes, and receiving a foreign tax benefit, in
> years in which they are nonresidents and then getting that money back
> tax-free when they are U.S. residents subject only to US income tax (many
> other countries use a territorial tax system instead of the worldwide
> system with foreign tax credits used by the US).
>
> If, however, Sec. 56(b)(1)(D) merely provided that refunds of taxes
> described in Sec. 164(a)(1)-(3) were excluded for AMT purposes, the tax
> evasions described above would be possible.
WHAT HAVE YOU BEEN SMOKING? WHERE YOU ENDED UP SMACKS OF WAGGING THE
DOG.
>
> So, once again you are completely wrong. My interpretation of the statute
> is not tantamount to saying that Sec. 56(b)(1)(D) is the same thing as
> simply excluding refunds of any taxes described in Sec. 164(a)(1)-(3).
>
> Face it dips**t, you're a loser; in fact, you're so damn dumb that you
> can't even realize that simple fact until it's been rubbed into your
> wall-eyed face several thousand times.
WHY AM I NOT SURPRISED THAT YOU ARE TRYING TO JUSTIFY FRAUDULENT
INSTUCTIONS THAT ARE CURRENTLY PRODUCING A BOUT A HALF BILLION FRAUD
ON THE UNITED STATES TREASURY?
CHEERS,
WDK
Dale E
Shyster1040 wrote:
> I'll take that as a "yes," namely, that you want to get your hide tanned,
> once again.
It's going to be a slow dance this time. I've been very busy as
evidenced by this 2/6 reply to your 1/22 post.
> Section 1 imposes a tax on individuals in an amount expressed as a
> percentage of the individual's taxable income.
>
> Section 63 defines taxable income as gross income less allowed
> deductions.
>
> Section 61 defines gross income as all income, from whatever source
> derived, and includes a non-exclusive list of certain items that are
> specifically included in gross income.
Here's section 61 in it's entirety:
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE
INCOME, ETC.
-HEAD-
Sec. 61. Gross income defined
-STATUTE-
(a) General definition
Except as otherwise provided in this subtitle, gross income means
all income from whatever source derived, including (but not limited
to) the following items:
(1) Compensation for services, including fees, commissions,
fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Alimony and separate maintenance payments;
(9) Annuities;
(10) Income from life insurance and endowment contracts;
(11) Pensions;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust.
(b) Cross references
For items specifically included in gross income, see part II
(sec. 71 and following). For items specifically excluded from
gross income, see part III (sec. 101 and following).
Please focus on the phrase "all income from whatever source derived."
As in "Gross income means all income from whatever source derived."
Let X = the phrase "all income from whatever source derived"...
Whatever that income is, and whatever source it comes from.
Thus
"Gross income means X"... What ever and where ever X comes from.
Do you have any problem with this equate so far?
--
Hal...@rock.com
Da...@synapticsparks.info
You have a problem with your silly tax scams dale!
www.evans-legal.com/dan/tpfaq.html
www.quatloos.com internet tax scams
www.quatlosers.com
Dale E
Hale_E
wrote Da...@synapticsparks.info
h http://www.synapticsparks.info/tax.scams
www.evans-legal.com/dan/tpfaq.html
www.quatloos.com internet tax scams
the pez lover
>
>
> Instead of an attorney, Ed Brown said he and his wife are relying on a
> handful of outside advisers, none of them lawyers.
>
>
m o r o n.
that is all.
Dale E
Hale_E
> Dale E wrote:
>
> > Dale E wrote:
>
>
> >http://www.synapticsparks.info/them/tax.scam
>
> http://www.synapticsparks.info/them/tax.scam