[Anonymous]

On their joint tax return, Sam and Joann, who are both over age 65, had adjusted gross income (AGI) of $150,000 and claimed the following itemized deductions:

Interest of $15,000 on a $100,000 home equity loan to purchase a motor home

Real estate tax and state income taxes of $18,000

Unreimbursed medical expenses of $15,000 (prior to AGI limitation)

Miscellaneous itemized deductions of $5,000 (prior to AGI limitation)

Based on these deductions, what would be the amount of AMT add-back adjustment in computing alternative minimum taxable income?

a.

$38,750

b.

$21,750

c.

$23,750

d.

$35,000

Solution:

Choice “a” is correct. Per the mnemonic “PANIC TIMME,” for purposes of calculating alterative minimum taxable income, the taxpayer must add back, among other things, the following itemized deductions:

– Taxes reduced by taxable refunds,

– Home mortgage interest when the mortgage loan proceeds were not used to buy, build, or improve the taxpayer’s qualified dwelling (HOUSE, CONDOMINIUM, APARTMENT, OR MOBILE HOME NOT USED ON A TRANSIENT BASIS),

– Medical expenses not exceeding 10% of AGI, and

– Miscellaneous deductions subject to the 2% of AGI floor.

The “PANIC TIMME” add-back is as follows:

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,000

Home mortgage interest not used to buy, build, or improve a qualified dwelling (THE

MOTOR HOME IS NOT A QUALIFIED DWELLING) . . . . . . . . . . . . . . . . . . . . . . . . . .15,000

Medical expenses in excess of 7.5% AGI but not in excess of 10% of AGI . . . . . . . . . . .3,750

Deductible miscellaneous expenses in excess of 2% of AGI . . . . . . . . . . . . . . . . . . . . . 2,000

Total “PANIC TIMME” add-back . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38,750

Choices “a”, “b”, and “c” are incorrect per the above rule and per the above calculations.

The only thing I am confused by is that the mobile home is not an allowable deduction for AMT. In the first part of the explanation, it says home mortgage interest is not added back to AMT when its used to buy build improve a qualified dwelling (which motor home is listed). But then, all of a sudden its says THIS motor home isn’t. Can anyone please help me understand. I’m guessing maybe it has something to do with that “transient basis” part.

[pfitz092]

Did you order the answers wrong? Isn't the correct answer 38750? Which is A not D?

[pfitz092]

Type “on their joint tax return sam and joann” into the search bar in the upper right corner though, there are about 5 existing threads related to this same question. I had trouble with it a couple weeks ago too.

[Anonymous]

Yea sorry I meant A not D. I have searched for topics including this questions and I can't find any talking about my specific problem. The fact is the explanation is contradicting itself. It says a motor home is an allowable deduction for the AMT, but in this same question it also is NOT an allowable deduction.

“Must add back home mortgage interest when the mortgage loan proceeds were NOT used to buy, build, or improve the taxpayer’s qualified dwelling (HOUSE, CONDOMINIUM, APARTMENT, OR MOBILE HOME NOT USED ON A TRANSIENT BASIS)”

Then a few lines below that:

“The add-back is as follows:

Home mortgage interest not used to buy, build, or improve a qualified dwelling (THE

MOTOR HOME IS NOT A QUALIFIED DWELLING) – $15,000″

I don't understand WHY the motor home is not a qualified dwelling. if anyone can please help clear that up.

[Anonymous]

Sigh, I f***ing hate becker. After some research, I found the answer here.

https://seidandco.com/deducting-your-motor-home-or-boat/

Anywho, after having their professor tell me a motor home qualifies for the acquisition indebtedness deduction (because the guidelines are very liberal), I didn't see that the AMT credit doesn't really accept the deduction if its used for a “boat” or motor” home. Thanks anyway!

[pfitz092]

Glad you found the answer. Ultimately, I think it is implied that a “motor home” is NOT a qualified dwelling.

Becker page R2-50 defines a qualified dwelling as a “house, apartment, condominium, or mobile home not used on a transient basis”. Note, they said “mobile” home…not “motor” home.

A motor home would be like an RV while a mobile home would be a trailer that someone lives in full time at a trailer park.

[Author]

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