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 2011,he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During 2011,he paid the following amounts of interest: What amount,if any,must Ted recognize as an AMT adjustment in 2011?

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 2011,he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During 2011,he paid the following amounts of interest:  What amount,if any,must Ted recognize as an AMT adjustment in 2011?

Quizplus · Accepted Answer

Ted must recognize an AMT adjustment because he used the home equity loan proceeds to acquire a luxury automobile, which is not a qualified residence interest expense under AMT rules. The total interest paid on the loan in 2011 was $6,200, but only the portion related to the luxury automobile is subject to AMT adjustment. The luxury automobile's fair market value was not given, so we cannot calculate the exact amount. However, assuming the luxury automobile cost $50,000 (the amount of the home equity loan borrowed), then the interest related to the automobile would be $4,800 (9.6% of $50,000), which is the amount that Ted must recognize as an AMT adjustment for 2011.

Ted,who Is Single,owns a Personal Residence in the City