A, B and C are each single, report wage income of $135,000, and take the standard deduction. The following additional information is provided about each taxpayer. A: Resides in New York. $45,000 interest income from Treasury bonds. B: Resides in Nevada. $45,000 capital gain from the sale of stock.
C: Resides in Florida. $45,000 interest income from private-activity municipal bonds.
All else being equal and taking into consideration the principles underlying the AMT, which of these taxpayers has the highest likelihood of being subject to the AMT in the current tax year?
A) Taxpayer A.
B) Taxpayer B.
C) Taxpayer C.
D) All three taxpayers are equally likely to be in AMT.

Question

Quizplus · Accepted Answer

Taxpayer C has interest income from private-activity municipal bonds, which are subject to the AMT. This type of income is specifically included in the AMT calculation as a preference item. Taxpayers A and B do not have any preference items listed, therefore they are less likely to be subject to the AMT.

A, B and C Are Each Single, Report Wage Income