Ted, who is single, owns a personal residence in the city.He also owns a condo near the ocean.He uses the condo as a vacation home.In March 2012, he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During 2012, he paid the following amounts of interest: What amount, if any, must Ted recognize as an AMT adjustment in 2012?
A)$0.
B)$4,800.
C)$6,200.
D)$11,000.
E)None of the above.

Question

Ted, who is single, owns a personal residence in the city.He also owns a condo near the ocean.He uses the condo as a vacation home.In March 2012, he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During 2012, he paid the following amounts of interest:  What amount, if any, must Ted recognize as an AMT adjustment in 2012?
A)$0. 
B)$4,800. 
C)$6,200. 
D)$11,000. 
E)None of the above.

Quizplus · Accepted Answer

Ted must recognize an AMT adjustment of $4,800. This is the amount of interest he paid on the home equity loan ($5,000) minus the amount of interest he would have been allowed to deduct for regular tax purposes ($200). Since the loan was used to acquire a luxury automobile, the interest is not deductible for regular tax purposes, but is added back for AMT purposes.

Ted, Who Is Single, Owns a Personal Residence in the City.He