Cap Gains and AMT

[Kram BergGold]

My client will have 200k of LT cap gains. She will have very little other income. So she is going to get about $30,000 o fthe gains taxed at zero %. Due to the $200k of income there is a good chance she will owe AMT. Will there be a Form 6251 page 2 adjustment for the zero % rate as there is for the 15% rate so the lower cap gain rate does not worsen the AMT?

[Roland Slugg]

I'm sure F-6251 as well as the regular Capital Gains worksheet will be changed to reflect the 0% tax rate. The 0% bracket for 2008 is a well-known provision, and the IRS is very good at modifying forms to reflect changes in the tax laws.

[DonPriebe]

I'm sure F-6251 as well as the regular Capital Gains worksheet will be changed to reflect the 0% tax rate. The 0% bracket for 2008 is a well-known provision, and the IRS is very good at modifying forms to reflect changes in the tax laws.

I posted a version of the CG worksheet at www.w2in.com/cg.pdf

[bruehaus]

They simply removed the line on 6251 where you take the amount in the 15% bracket times 5% for 2008-2010. So there is no AMT due to the 0% cap gains rate. See the draft 6251 for 2008.

[bullroot]

If the taxpayer has to pay the AMT would it make sense to pay part of the estimated state income tax on the capital gains after the first of the year so as to preserve the deduction (by moving it to 2009)? Of course this would require claiming itemized deductions next year with the amount exceding the standard deduction by an amount equal to or exceeding the amount of the 2008 state income tax moved into 2009.

It is my long held view that long-term capital gains should be excluded from the calculaion of the AMT exemption exclusion calculation but that would take an act of Congress. As things stand now the capital gains accrued over multiple years are pitted against an annual exclusion amount. It makes no sense from a tax policy perspective. The basic question is why should a taxpayer in your clients situation (substantial capital gains and very little regular income) pay a higher effective capital gains rate on her capital gains than the taxpayer millions of dollars in regular income.