Retroactive AMT break may be available to individuals and corporations.

• Author: Haskell, Arnold
• Position: Alternative minimum tax - Brief Article

In Letter Rulings (TAM) 9320003 and 9321063, the IRS has further solidified the concept that the regular tax and the alternative minimum tax (AMT) are two separate and independent taxing systems. In these rulings, the Service has indicated that deductions based on adjusted gross income (AGI) or taxable income should be computed separately for regular tax as well as for AMT purposes.

The rulings specifically addressed the charitable contribution percentage limitations of Sec. 170(b)(1) and the percentage depletion limitations under Sec. 613A(d)(1); however, the concept should apply to any items determined with reference to AGI or taxable income.

For regular tax purposes, an individual's charitable contribution deduction is generally limited to 50% of AGI. Any amount disallowed currently can be carried forward for a period of five years at which time the carryovers expire and the deductions are lost forever. The IRS has determined that because the AMT is a separate and independent taxing system, these limitations are determined separately for AMT and regular tax purposes. This may give rise to different allowable charitable contribution deductions and carryovers for AMT and regular tax.

Letter Ruling 9320003 was the result of an amended return filed by a taxpayer who had negative AGI and taxable income for...