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Saturday, March 22, 2003


I would be willing to bet that back in 1999, when Sun Microsystems programmer David M. Marx had an AGI of over a million dollars, it would not have been worth his time to argue pro se in Tax Court over $439.45 in AMT. But times change, and now Marx is offering himself as the test case (well, sort of, this is a Summary Opinion) to determine whether a person can use the standard deduction on their 1040 taxes, but itemize on their AMT. Tax Court says no.

Marx had significant itemized deductions, mostly state and local income taxes, but with his AGI so high, his section 68 limitation reduced his allowable itemized deductions below his standard deduction, so he took the standard. When the IRS inquired about AMT, Marx took the position that since section 56(b)(1)(F) states that section 68 does not apply to the AMT, he can now claim his itemized deductions for purposes of the AMT. Tax Court�s denial rests on principals of statutory construction. Marx interpreted 56(b)(1)(F) in isolation for the entirety of section 56. Section 56 does not recompute taxable income, but only makes adjustments to the already determined taxable income. So because he took the standard deduction on the 1040, he could not change it on the AMT. Further, Tax Court reasoned that Marx�s interpretation overlooks 56(b)(1)(E), which states that the standard deduction is not allowed for the purposes of the AMT.

As an attorney, I can see that Tax Court�s reasoning is logical, maybe even obvious. But whether I am being fair to Marx, or stereotyping programmers, it is difficult not to see this as a clash between different ways professionals think. Before interpreting section 56, Tax Court cited authority for the principals of statutory construction, drilled into attorneys� heads in 1L, that the court must interpret the statue so as to give effect to the intent of Congress, and so as to not render portions of the statute inoperative or superfluous. These two concepts might be a bit much to ask a highly intelligent programmer to wrap his mind around. If a computer were to attempt to follow the instructions of line 56.b.1.F of a program, the computer would not look at the program as a whole so as to give effect to the intent of the programmer and not render line 56.b.1.E superfluous. Instead, line 56.b.1.F just means what it means. Despite tax law and programming appearing to occupy similar groung in semi-formal logic, they are really polar opposites. Programming is engineering with words. Tax law is literary criticism with numbers.

Tax Court in this case also found where Marx actually owed another $150 in AMT on a different issue, but did not charge him with it because the IRS missed it.

One question. If taking the standard deduction would have saved Marx less than $439.45, could he have taken the itemized deduction on the 1040 so that he could take it on the AMT? Or are you required to take the standard if it is higher than your allowable itemized deductions?

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