The U.S. Tax Court today, in a case of first impression, held that the taxpayer is not entitled to use an alternative minimum tax (AMT) credit that arose from her deceased husband’s exercise of incentive stock options in 1998 to offset her own individual income tax liability for tax year 2009.
The case is: Vichich v. Commissioner, 146 T.C. No. 12 (April 21, 2016). Read the Tax Court’s opinion [PDF 73 KB]
The husband-decedent, before his marriage to the taxpayer in this case, was married to another individual. In 1998, the husband exercised employer-granted incentive stock options that resulted in an AMT liability of approximately $708,000 which he reported on a 1998 tax return that he filed jointly with his then-wife. The payment of that AMT liability in 1998 generated an AMT credit carryforward.
The couple divorced in 2002. The husband then married the taxpayer in 2002, and they remained married until he died in 2004. During the marriage, they filed joint returns. On their return for 2003, the couple claimed an AMT carryforward of approximately $300,000.
The taxpayer did not claim the AMT carryforward on her 2004 return that she filed as a surviving spouse, and the husband’s estate did not claim the AMT carryforward.
On her 2009 tax return, the taxpayer reported there was an AMT credit derived from the husband’s 1998 AMT credit carryforward which she then used to offset her individual income tax liability. The IRS disallowed the claimed AMT credit and determined a deficiency in her income tax for 2009.
The Tax Court today, in a case of first impression, held that the taxpayer was not entitled to use the AMT credit to offset her individual income tax liability for 2009. The court explained that while neither the statute itself nor regulations provide an answer as to whether the taxpayer was entitled to the AMT credit, applying similar rules limiting the transfer of net operating loss (NOL) carryovers between spouses would similarly limit AMT carryforwards as in this case.
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