What is Alternative Minimum Tax? IRS

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Most Popular Q&AWhat is MAT (Minimum Alternative Tax)?-->
by mahnaashu in Money
Brief Explanation of Minimum Alternative tax (MAT):Minimum alternative tax is also a federal tax, imposed in United States of America. Two types of MAT’s exist. One for companies and other for individuals. MAT for individuals in illustrated below:This tax has been imposed under 26U.S.C & 55 and do not allow the exemptions and deductions that are allowed while calculating normal tax liability. MAT’s rate starts from 25% to 27%.MAT was introduced by Tax reform Act 1969 and was imposed in 1970.Its aim was to trap 155 wealthy tax class that were given so many exemptions and deductions under normal tax.In recent years AMT has gained much attention because it does not prone to inflation and tax holidays. Most of its taxpayers are moderate income tax payers.The AMT resembles with flat tax of 28% on gross income over $175, 000 add 26% on less than $175, 000 less any exemptions allowed. But the taxpayer has to file separate return for this tax on form 6251.Also its set-off is different from regular tax; and exemptions, deductions; allowances are not defined as so in regular tax.Like all other taxes, MAT is also tried to be avoided. The solution to the problem is to have less & less tax preference deduction from other sources like Real Estate and state income taxes.
I am a 13 year resident of NC. In March of 2007 I sold 16 acres of land deeded to me by my living father for $183, 722. The value of the land when bought several years ago was $6, 000 an acre. 16 acres were sold = $96, 000.$183, 722 - $96, 000 = $87, 722 Long Term Gains to be taxed. For information if helpful:My 2006 AGI = $102, 875; Taxable income=$62, 288 and tax liability = $8, 684 but paid $10, 437 thus $1, 753 refund was due. Received $1, 494 Federal refund too. Filing jointly on fixed incomes again for 2007 our salaries have increased 5%. My purpose for inquiry is wanting to know the amount of State Capital Gain Taxes to expect due in April 2008. Is the following computation correct? I understand from one CPA that there is a 44% exclusion in NC or SC applied to the $87, 722 (Long Term Gain) =$38, 598.$87, 722 - $38, 598 = $49, 124 which would then be the (State LT Capital Gains). $49, 124 x 7% tax rate = $3, 439 in state taxes to be paid in April 2008.Federal Capital Gains Tax at 15% = $13, 158. If we set aside the total $16, 597 for Federal and State Capital Gains Taxes will this be sufficient? Knowing this information will I be subject to any penalties or alternate minimum taxes (?) ? Do I file a SC tax return in addition to my NC return. We just don't want any surprises when we think we are ready to pay our tax obligation in April 2008 for the year 2007 gains f