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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3918
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Expensing the 59(e) costs does not lower the tax liability

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Expensing the 59(e) costs does not lower the tax liability and only increases the AMT tax which already is in a C/Forward position. This asset was sold in 2013, and his income will be over $1M mostly at cap gain rate and 2014 and later his annual income will be passive income and retirement income in the $200K range. Will the AMT carryforward credit be usable or wasted?
Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

Lane :

Certain items in Lines 2-28 of the Form 6251 are simply not deductible for AMT purposes, such as taxes, home equity mortgage interest and miscellaneous deductions. Lines 2-5, 8-10, 13 and 14 are exclusion items. If you paid AMT based on entries on these lines, you will not receive a tax credit for AMT.

Lane :

HOWEVER<

Lane :


Other items create timing differences, such as depreciation differences between the two tax systems, and the phantom income from exercising incentive stock options. These items will generate a credit on Form 8801 and reduce your taxes in future years.

Lane :


Lines 15-28 are deferral items. An AMT credit may be generated based on the reversal of the timing difference of these items. For example, AMT depreciation methods may be slower than those for the regular tax, but you will eventually receive the same deduction.

Lane :

I still don't see you coming into the chat. ... I'll move us into the "Question and Answer" mode ... Maybe that will help

Lane :

But, depending on what generated the credit it MAY NOT be wasted.

Lane :

Let me know if you have questions

Lane :

Lane

Expert:  Lane replied 11 months ago.
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Expert:  Lane replied 11 months ago.


Hi Glen,

... just checking back in here, as you never came into the chat.

Again, if this was from line 23 and you can go back later and reverse the timing difference of the preference item, then you may have usable credit.

Lane
Customer: replied 11 months ago.


The 59(e) costs were a K-1S line 12 "J" cost for "Labor" which appears to be a cost not deducted elsewhere so it deserves to be expensed or capitalized somewhere. Expensing it in the current year creates the AMT credit to increase with no current year tax savlngs and looks like it will be wasted. Capitalizing it an amortizing it over 3 years S/L is allowable by election if still allowable for older years. I know about the allowed or allowable dilemma I am faced with for 2009 so that refund will be lost. It is worth capitalizing the 2009 and 2011 amounts for purposes of lowering taxable income without AMT problems since not an AMT preference (if capitalized). Am I barred from electing to capitalize for 2009 and 2011 as I see no language calling for being done before initial filing dates expire?

Expert:  Lane replied 11 months ago.

No, I think you SHOULD elect.

An amended return is an amended return.

I can find nothing either.

And this doesn't come under the statute for "refund" purposes.

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3918
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 7 other Tax Specialists are ready to help you
Expert:  Lane replied 11 months ago.


Thanks Glenn,

Lane

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