AMT and Property Taxes

[DMICPA]

Taxpayer has two residences and three acres of land in which another residence will be constructed someday.

Property taxes for all three properties are $77,000 per year and are on Schedule A.

I completed the 1040 and the AMT is present.

I got an idea and took off the Schedule A raw land property tax of $25,000. Recalculated the the 1040 and there was no change in the overall tax! Weird but true.

So, I looked into code section 266 and it says you can elect to capitalize carrying charges on unproductive land. This lot is unproductive at this point and would be I imagine until a home is actually built so every year I could consider making the election to capitalize the carrying charges.

Does this sound like a good idea! I see no downside. It will increase the basis of the land.

Could come in handy on similar cases.

[Burke]

I got an idea and took off the Schedule A raw land property tax of $25,000. Recalculated the the 1040 and there was no change in the overall tax! Weird but true..

Welcome to the world of AMT. Once you are in that AMT world, nothing you do makes much difference. Regular tax goes up, AMT goes down. AMT goes up, regular tax goes down. Net result = same tax due. Good idea on the capitization, though.