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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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I WOULD LIKE TO KNOW WHAT SITUATIONS CAN SOMEONE WHO HAS HAD TO USE FORM 6251 CAN GET A CREDIT IN FUTURE YEARS. I HAD A CLIENT WHO HAD TO INCLUDE INCOME FROM THE GAIN IN AN ANNUITY THAT THEY WERE THE BENEFICIARY. THE OWNER OF THE ANNUITY HAD TO PAY A LARGE ESTATE TAX. WHEN I DEDUCTED THE AMOUNT OF TAXES THE CLIENT COULD DEDUCT ON SCHEDULE A TO AVOID "DOUBLE TAXATION" ON THE SAME INCOME THERE WAS A LOT OF AMT TO PAY. THIS TRULY DEFEATS THE IDEA OF NOT PAYING TAX ON INCOME TWICE. SINCE THIS IS A ONE TIME CHARGE CAN THEY GET A CREDIT IN FUTURE YEARS. THANKS FOR YOUR HELP- BUZ

You are correct in that when a beneficiary inherits an asset that includes in its value income in respect of a decedent (i.e. IRD), the beneficiary is entitled to a deduction for the additional estate tax incurred by the decedents estate as a result of the inclusion of IRD in the estate tax calculation.  


However, the deduction for this additional estate tax is taken on line 27 of schedule A (i.e. miscellaneous itemized deductions not subject to the 2% of AGO limitation), not line 26.  Therefore, this deduction is not an adjustment for AMT purposes (only the amount of line 26 is added back on line 5 of form 6251). 


While the amount on line 27 may be effectively reduced somewhat by the itemized deduction phaseout provisions (if the taxpayer income is high enough) it will not cause AMT to be incurred.  Therefore, no AMT credit carryforward can be generated by this deduction.


I would go back and refigure your schedule A and form 6251 with the estate tax deduction on line 27 and see what change results.  FYI AMT credit carryforwards are generated because of the addback of "deferral items" and may only be used in future years to the extent that your regular tax exceeds AMT in that year.  Deferral items include accelerated depreciation, ISO adjustments, passive activity adjustments, etc. 

Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
Christopher Phelps and 3 other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: IF I HAVE ANOTHER QUESTION IN THE FUTURE CAN I REQUEST A SPECIFIC PERSON TO ANSWER MY QUESTION IF THEY CAN OR WANT TO? BUZ

See my private message to you.


Thanks,


Chris

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