AMT Schedule D is not taking into account long-term non-covered (box E) losses (regular Schedule D is getting this right). Simple stocks/options trade. How to fix this?

Forum|Forum|3 years ago
March 29, 2023
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For additional context, my tax situation is very similar to what it was last year. The interests, dividends, W2 are all within less than a percent of last year's. The difference is in investment activity (1099-B was received). In this case, I sold some long held mutual funds for a loss - parts of these mutual funds were acquired prior to 2012 and hence these were categorized as long-term non-covered trades. And these are trades in equities/options (nothing fancy/exotic and no ISOs (incentive stock options), etc). I was expecting my tax bill to be lower because of this (i.e. everything similar to last year except for the tax loss harvesting). Instead, what I am finding out is that I am getting hit with AMT! After going over the forms in Turbo Tax, I am finding out that the biggest culprit is the AMT Schedule D - the AMT schedule is NOT offsetting my short term gains with the long-term non-covered losses that I took (the regular/plain vanilla Schedule D is getting this right by offsetting my short term gains with the long term losses). As a result, there is a difference between the gains in regular schedule D and AMT schedule D and that is triggering my AMT. So what I am looking for is the right way to do this so that Turbo Tax recognizes the long term non-covered losses in AMT Schedule D.

TurboTax Online

AmyC

Employee

Correct, long term losses are one of the big triggers for AMT. There is no correcting the loss on AMT but there are a lot of worksheets and rules.

I am assuming line 2k is your issue. The 6251 uses the $3,000 cap in figuring the AMT. Please see Form 6251 instructions which includes this portion of an example for line 2k:

For the AMT, you have a $25,000 short-term capital loss from the first sale, and a $40,000 long-term capital loss from the second sale, resulting in a net capital loss of $65,000 for the AMT. However, only $3,000 of the $65,000 net capital loss is allowed for 2022 for the AMT.

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AJ101Author

Hi AmyC,

Thanks for taking the time to respond. In the instructions you linked to, it was an example of ISO exercise - in my scenario, there is no ISO involved. Here are some more details regarding my taxes:

1. My 6251 has a positive value on line 2k. This came as a surprise to me. So I went looking for how it got there.
a. My Schedule D shows a short term gain on line 7.
b. My Schedule D shows a long-term loss, say, LT1 on line 8a.
c. My Schedule D shows a long-term loss, say LT2, on line 9. Both line 8a and line 9 agree with the 1099-B I received.
d. Note that these are all regular stocks/options trades through my brokerage account - no ISO involved in this.
e. My Schedule D has a net long-term loss on line 15 after netting out all the gains against the losses.
f. The combined line 16 shows a net gain, say N1.

2. Next, I went and looked into my "Schedule D AMT".
a. Line 7 shows a net short-term gain - this agrees with line 7 on the regular Schedule D.
b. Line 8a shows a long-term loss of LT1 - again, this agrees with line 8a on the regular Schedule D.
c. However, line 9 is not filled out by Turbo Tax (it is blank) - as a result, my long-term loss of LT2 is not being considered in AMT calculations.
d. All the other details for the long-term gain/loss in Schedule D AMT is identical.
e. As a result, my Schedule D AMT shows a net gain of N2 on line 16 - N2 is much higher than N1 (from line 16 of regular Schedule D).

What I am not clear on is, why are my long-term losses (for which the broker didn't report cost-basis to IRS) not being considered in "Schedule D AMT"? The instructions on line 9 of "Schedule D AMT" says: "Long-term totals from all Forms 8949 with box E checked" - going by that, I expect Turbo Tax to have filled in line 9 with the value from form 8949. My form 8949 does show LT2 with box E checked. So why was that not populated on line 9? This is resulting in a larger/additional tax burden on me.

Any insights would be much appreciated!

Thanks,
AJ

RLKalman

I also have the issue that Schedule D AMT is not reporting the amounts from Box E. (Data imported from Schwab.) This appears to be a bug that has not yet been addressed by TT.

Is the proper solution to Override and enter the amounts on Schedule D AMT Part II line 9?

I see no other way to report the correct amounts.

I would appreciate a reply from TT -- it is 7 days to the filing deadline.