Gabriel, age 40, and Emma, age 33, are married with two dependents. They reported AGI of $110,000 for the year, including net investment income of $10,000 and gambling winnings of $2,500.
They incurred the following expenses during the year, all of which resulted in itemized deductions for regular income tax purposes.
Medical expenses (before AGI floor) ............................................................... $13,000
State income taxes ........................................................................................ 2,800
Personal property tax ....................................................................................... 900
Real estate tax ............................................................................................. 9,100
Interest on personal residence ........................................................................... 8,600
Interest on home equity loan (proceeds were used to buy a new fishing boat) .................. 1,800
Investment interest expense ............................................................................. 2,600
Charitable contribution (cash) .......................................................................... 4,200
Unreimbursed employee expenses (before 2%-of-AGI floor) ..................................... 3,800
a. What is Gabriel and Emma's AMT adjustment for itemized deductions? Is it positive or negative?
b. Now also assume that Gabriel and Emma also earned interest of $5,000 on private activity bonds that were issued in 2012. They borrowed money to buy these bonds and paid interest of $3,900 on the loan. Determine the effects of these amounts on AMTI.