Ted, who is single, owns a personal residence in the city.He also owns a condo near the ocean.He uses the condo as a vacation home.In March 2012, he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During 2012, he paid the following amounts of interest: What amount, if any, must Ted recognize as an AMT adjustment in 2012?
A)$0.
B)$4,800.
C)$6,200.
D)$11,000.
E)None of the above.

Question

Ted, who is single, owns a personal residence in the city.He also owns a condo near the ocean.He uses the condo as a vacation home.In March 2012, he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During 2012, he paid the following amounts of interest:  What amount, if any, must Ted recognize as an AMT adjustment in 2012?
A)$0. 
B)$4,800. 
C)$6,200. 
D)$11,000. 
E)None of the above.

Quizplus · Accepted Answer

Ted must recognize $4,800 as an AMT adjustment in 2012. The interest on the home equity loan for the condo counts as investment interest, which is not deductible for regular tax purposes but is included in the AMT calculation. Therefore, Ted can add $2,400 ($50,000 x 4.8%) of interest to his AMT adjustment. Ted's personal residence is not relevant in this calculation as it is not used for investment purposes. The luxury automobile loan interest is also not relevant for AMT adjustments.

Ted, Who Is Single, Owns a Personal Residence in the City.He