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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4515
Experience:  35 years tax experience, including four years at a Big 4 firm.
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We are reviewing our 2014 tax prep and an related main

Customer Question

We are reviewing our 2014 tax prep for accuracy and an AMT related main question came up that we hope you can help with and some related follow up questions.
Main Question:
We have an investment property with a mortgage. The proceeds of this mortgage went for renovation of the investment property and the other half went towards purchase of stock which had long term capital gains realized in 2014.
Since this is an investment property....not a primary residence or second home we believe that it would make sense that the interest on the portion of the mortgage used to get the stock would be deductible and not subject to AMT tax adback. We paid a lot in AMT and had this interest added back which hurt us. Is this correct? Where in the tax code does it say this...I see stuff about adding back for AMT interest expense for mortgage for home equity that is not used for purchase or improvement of primary or second "home" if you buy a car with a home equity line of credit....but an investment property is not a "home".
Follow Up Related Questions: Wouldn't brokerage account margin interest expense be useable and not subject to AMT tax adback?
Also, aren't dividends and long term capital gains not subject to AMT tax?0
If unfortunately for me my 2014 investment interest expense is added back for AMT, can the interest expense be saved for use in a future year when I am not subject to AMT?
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.

Hi from just answer. I'm PDtax, and can assist.

I want to review the interest tracng rules, and will advise.

Expert:  PDtax replied 1 year ago.

Your idea could work, except for the source of the funds. I bet your rental property is passive income, and debt from a passive investment can not be made nonpassive. If this is indeed a passive activity, this would be an AMT adjustment.

Expert:  PDtax replied 1 year ago.

The other income items you mention, interest and capital gains, are not excluded from the AMT calculation.

Expert:  PDtax replied 1 year ago.

Lastly, the lost interest deduction is not treated separately as a carryforward. Any AMT you pay creates a minimum tax credit that acts as the carryforward you seek. When your situation allows, the min tax credit can be used against your future tax liabilities.

Expert:  PDtax replied 1 year ago.

Thanks for asking at just answer. Positive feedback is appreciated. I'm PDtax.