Gabriel, age 40, and Emma, age 33, are married with two dependents. They reported AGI of $110,000 for the year, including net investment income of $10,000 and gambling winnings of $2,500. They incurred the following expenses during the year, all of which resulted in itemized deductions for regular income tax purposes.
Medical expenses (before AGI floor)......................................................... $13,000
State income taxes ................................................................................2,800
Personal property tax............................................................................... 900
Real estate tax ....................................................................................9,100
Interest on personal residence ...................................................................8,600
Interest on home equity loan (proceeds were used to buy a new fishing boat) ...........1,800
Investment interest expense .....................................................................2,600
Charitable contribution (cash) ...................................................................4,200
Unreimbursed employee expenses (before 2%-of-AGI floor) ..............................3,800
a. What is Gabriel and Emma's AMT adjustment for itemized deductions? Is it positive or negative?
b. Gabriel and Emma also earned interest of $5,000 on private activity bonds that were issued in 2013. They borrowed money to buy these bonds and paid interest of $3,900 on the loan. Determine the effects of these amounts on AMTI.