Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

ATTORNEY IN MCLEOD ISO AMT CASE RESPONDS

March 31, 2005

We received the following email in response to our post, TAX COURT TO MCLEOD AMT VICTIMS: SORRY, BUT YOU'RE STILL SCREWED. The author was the taxpayer attorney in the Speltz case discussed in the post.

Dear Mr. Kristan,

I felt the article on the Speltz Tax Court decision was very well written and properly hit home on the need for Congress to provide remedial relief on this critical area of unfairness and injustice.

One thing I did want to point out, however, is that the conclusion that “as a matter of law, the Judge was right” is actually in my belief not correct. Certainly there is no question that the liability imposed by the ISO AMT code is correctly calculated, but that is not the end of the inquiry. Congress passed Section 7122 in 1998, and that law and its corresponding Regulations provide for relief in situations where “public policy and equity” considerations engage. Certainly I would argue (and did, in fact) that if that provision does not apply in a case where a taxpayer is being asked to pay taxes at a 220% tax rate (11x that of a similarly situated taxpayer), then I’m not sure it has any meaning at all – and Congress does not pass laws that have no meaning. Proper consideration and statutory interpretation of all the tax laws that apply in this case (the ISO AMT Statute, the ISO Statute and the ETA Statute) and a review of the relevant legislative history, lead to the conclusion that the Speltzes are indeed entitled to relief under the public policy/equity prong of Section 7122, and also under the hardship prong.

Of course, relief from the Court would only have solved half the problem for the Speltzes, who are already overextended in their efforts to pay over $100,000 in excess tax. Relief from Congress is needed, and thankfully is gaining great support in both the House and Senate. After a number of years, we are hopeful that Congress is now focusing on the need for relief for persons subjected to these egregiously disproportional ISO AMT tax liabilities.

Attached please find (i) one of the Briefing papers for the Speltzes that supports the positions I’ve summarized above, (ii) a summary and PowerPoint Presentation on the proposed legislation, and (iii) an encouraging mention of this legislation in a recent Tax Notes article, with positive comments from Reps. McCrery and English. We are encouraged that relief is on the way for the Speltzes and the many others harmed by this unintended effect of the ISO AMT law.

Please do not hesitate to contact me if you have any questions.

Best Regards.

Tim Carlson
President
Coalition for Tax Fairness
301.515.6584

Links to the attachments mentioned are below. We don't link to the Tax Notes article because it is a copyrighted piece behind a subscriber firewall.

Tax Court Petition

Summary of proposed AMT relief legislation

Powerpoint discussion of ISO AMT rules

 • AMT       Bookmark: del.icio.us • Digg • reddit