1. Anchin, Block & Anchin LLP
Accountants and Advisors
1375 Broadway
New York, NY 10018
Tax Benefit Recoveries and
the Alternative Minimum Tax
Charles Taverna & Jeffrey Schwartz

2. Relevant Code Section
• IRC § 111 – Recovery of tax benefit items
(a) Deductions
Gross income does not include income
attributable to the recovery during the taxable
year of any amount deducted in any prior
taxable year to the extent such amount did not
reduce the amount of tax…”

3. Applicable Situation
Year 1
• Taxpayer is subject to Alternative Minimum Tax
• Benefit of tax payments from schedule A reduced
Year 2
• Taxpayer is only subject to Regular Income Tax
• Receive state tax refund from year 1 payment

4. Scenario Facts
• Paid AMT of $20,000
• Paid state taxes of
$205,755
• Overpaid state tax by
$50,000
• Subject to regular
income tax, only
• Paid state taxes of
$150,000
• Received the $50,000
state tax overpayment.
2014 2015
• Anne & Andy Taxpayer are a high-net-worth couple
living in New York City. They are married filing
jointly, and the nature of their income is ordinary.

5. GoSystem Default Calculation
• Allocating refund over 2 years:
• In 2015 the Taxpayers paid $150,000 in state
taxes but only receives a deduction on
Schedule A for $128,920.

6. GoSystem Calculation (cont.)

7. GoSystem Calculation (cont.)

8. Tax Benefit Rule for AMT

9. Tax Benefit Rule for AMT (cont.)
• Part 2
• Major Denominator
• The taxpayers
marginal tax rate in
2015
• Part 1
• The Numerator
• The Taxpayers’ AMT
from 2014
• Refund that had not tax benefit in prior year
20,000
39.6%
= 50,505

10. Year 1 Form 6251

11. Tax Benefit Rule for AMT (cont.)

12. Tax Benefit Rule for AMT (cont.)

13. Benefit to the Taxpayers

14. Questions
THANK YOU!