Capital gains are
income derived from the sale of property, most typically investment property.
While capital gains are not directly an AMT preference item, they do have an
impact on a taxpayer’s Alternative Minimum Tax, and, therefore, are an
essential element of AMT planning. One real-life scenario with which the writer
is familiar involved a retiree with what one would call a typical investment portfolio,
including mutual funds, and it was solely a larger-than-usual year-end capital
gain distribution from one mutual fund that threw that individual into the AMT.
For a little review,
capital gain income historically has been taxed at a rate lower than the rate
that applies to other, “ordinary,” income such as salaries and wages
and interest income. This lower rate applies only to “long-term”
capital gain (LTCG), which means the taxpayer must hold the property for over
one year before selling it. Under current law, most dividend income also
receives this favorable LTCG treatment.
In general, the tax
rates that apply in computing the Alternative Minimum Tax are different from
the rates that apply in computing the Regular Tax. However, LTCG is taxed at the
same rate for both computations – typically 15%. Thus, a LTCG by itself is not
an AMT item. Despite this treatment, however, a LTCG definitely can be a factor
that triggers the AMT.
Here’s what happens.
First, every taxpayer is entitled to an AMT Exemption amount. This Exemption is
designed to prevent taxpayers with only small AMT items from paying the AMT.
For example, a couple filing a joint return for 2009 is entitled to an
Exemption of $70,950. Unfortunately, however, this Exemption is phased out as the
taxpayer’s income increases. The actual phase-out is the loss of $1 of
Exemption for every $4 of additional income (i.e., at …
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M&A, in some big investment banks, is a centerpiece of relationships with large corporations, as a result of (a) the bank speaks on to the consumer firm’s board, CEO and CFO and will get speedy suggestions, (b) the financial institution earns tens of millions in fees, if a deal is successful, and (c) the bank would not need to use up its stability sheet, except it chooses to finance an acquisition (as many banks do).
One of …
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Of their JEP article , Greenwood …