Choice "A" is correct. Per the mnemonic "PANIC TIMME," for purposes of calculating alterative minimum taxable income, the taxpayer must add back, among other things, the following itemized deductions: Taxes reduced by taxable refunds, Home mortgage interest when the mortgage loan proceeds were not used to buy, build, or improve the taxpayer's qualified dwelling (house, condominium, apartment, or mobile home not used on a transient basis), Medical expenses not exceeding 10% of AGI, and Miscellaneous deductions subject to the 2% of AGI floor.
The "PANIC TIMME" add-back is as follows: Taxes | $ 18,000 | Home mortgage interest not used to buy, build, or improve a qualified dwelling (the motor home is not a qualified dwelling) | 15,000 | Medical expenses in excess of 7.5% AGI but not in excess of 10% of AGI (7.5% AGI is still used for taxpayers age 65 and over) | 3,750 | Deductible miscellaneous expenses in excess of 2% of AGI | 2,000 | Total "PANIC TIMME" add-back | $ 38,750 |
Choices "d", "c", and "b" are incorrect per the above rule and per the above calculations. |
