Paul L. Caron

Wednesday, June 6, 2007

Court of Federal Claims: $3,000 Capital Loss Deduction Limitation of § 1211 Applies for AMT Purposes

In Pierce v. United States, No. 05-1071T (Ct. Fed. Cl. 5/31/07), the Court of Federal Claims held that the $3,000 capital loss deduction limitation § 1211 applies for AMT purposes as well as for regular tax purposes:

The Government then argues that "Plaintiffs can not, and do not, cite any 'statute, regulation, or other published guidance' providing that § 1211 does not apply for AMT purposes." Accordingly, the Government advises that "every court that has addressed this issue has concluded that § 1211 applies to the AMT."[Fn.26] ...

The court has determined that § 56(d)(2)(A)(i) does not allow a taxpayer to circumvent § 172(c) and (d) and § 1211 by including capital losses in AMT adjustments for purposes of the AMT net operating loss. In light of § 55 and Treas. Reg. § 1.55-1(a), the Tax Court's jurisprudence in this area, and the United States Court of Federal Claims' recent decision in Guzak, Plaintiffs' reliance on legislative history that does not explicitly mention either § 172(c) and (d) or § 1211 is not persuasive.[Fn 29] Therefore, the court concludes that the limitations of § 172(c) and (d) and § 1211 apply to the deduction of AMT capital losses when calculating an AMT adjustment under § 56(d)(2)(A)(i).

Fn.26: See Guzak v. United States, 75 Fed. Cl. 304, 313 (2007) ("[L]imitations set forth by § 172(c) & (d) and § 1211 apply to the AMT[.]"); Merlo v. Comm'r, 126 T.C. 205, 211 (2006) ("We find no statute, regulation, or other published guidance that purports to change the treatment of capital losses for AMT purposes. Therefore, we hold that the capital loss limitations of sections 1211 and 1212 apply in calculating a taxpayer's AMTI.") ... 

Fn.29:  Congress' intent is also found in the Joint Committee's General Explanation of the Tax Reform Act of 1986 and Joint Committee's Technical Explanation of the Tax Relief and Health Care Act of 2006, both acknowledging that § 1211 applies to AMT capital losses.

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