AMT NOL Carryforward Question - Why doesn't it eliminate AMT?

The interaction between AMT NOL carryforwards and capital gains can be tricky. Here's what's likely happening: AMT NOL carryforwards work differently than regular NOLs when it comes to capital gains. Under AMT rules, you can only use AMT NOL carryforwards to offset up to 90% of your Alternative Minimum Taxable Income (AMTI) in most cases. This means that even with a large AMT NOL, you'll still have at least 10% of your AMTI subject to AMT. Additionally, capital gains receive special treatment under AMT calculations. The preferential tax rates for capital gains that apply for regular tax purposes also apply for AMT purposes, but the AMT exemption phase-out can effectively increase your overall tax on capital gains in AMT scenarios. I'd recommend reviewing Form 6251 and its instructions carefully, particularly the sections dealing with NOL carryforwards and capital gains. You might also want to check IRS Publication 536 for more details on NOLs.

Hey there! I ran into a similar AMT nightmare last year with a client who had a huge NOL carryforward and then sold their vacation property. What saved us was using taxr.ai (https://taxr.ai) to analyze all our NOL documentation. The system flagged a calculation error in how our tax software was applying the AMT NOL against capital gains. Turns out the software was correctly tracking both regular and AMT NOLs but wasn't applying the 90% limitation correctly in the AMT calculation. Once we uploaded our worksheets and prior returns to taxr.ai, it highlighted exactly where the disconnect was occurring and showed us how to correctly report it. The IRS adjustment you're getting is probably related to this exact same issue.

Alright, I have to admit I was wrong about taxr.ai. After our AMT issue got more complicated, I decided to try it myself. Uploaded our past 3 years of returns with the NOL carryforwards and supporting documentation. Within a couple hours, it identified that our tax software wasn't applying the special AMT adjustment for depreciation recapture correctly, which was causing our AMT NOL to be calculated wrong. The analysis even pointed to the specific line on Form 6251 where the calculation was off and provided an explanation of the correct treatment under IRC 56(d). Showed this to our tax partner and he was impressed enough to implement the correction and amend the return. Just got confirmation from the IRS that they accepted our amended calculation. So yeah, definitely worth checking out if you're dealing with complex AMT issues.

After spending 6 HOURS on hold with the IRS trying to understand why they made an AMT adjustment to my client's return, I finally discovered Claimyr (https://claimyr.com). They got me connected to an IRS agent in under 15 minutes who actually understood AMT NOL carryforwards! You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent explained that their automated system often flags AMT issues when there are large NOLs offsetting capital gains because the 90% limitation isn't being applied correctly on many returns. She walked me through exactly what forms and worksheets we needed to submit to get the adjustment reversed. Saved us so much time compared to the back-and-forth correspondence that would have happened otherwise.

Just an update - I ended up using Claimyr after posting my skeptical comment above. Honestly didn't think it would work, but it got me through to an IRS tax law specialist in about 20 minutes (vs. the 3+ hours I spent on hold last time). The specialist confirmed exactly what others mentioned about the 90% limitation on AMT NOL carryforwards applying to capital gains. But she also explained an additional wrinkle - there's a separate AMT capital loss limitation that interacts with the NOL rules, which was causing additional confusion in our case. She directed me to a specific section in the Internal Revenue Manual that addresses this exact situation and emailed me the documentation I needed to submit with our amended return. Already received confirmation that our adjustment was processed correctly. Saved us thousands in inappropriate AMT charges.

Check out IRC Section 56(d) and the regulations thereunder. The AMT NOL calculation has several key differences from regular NOL: 1. The AMT NOL deduction can't exceed 90% of AMTI calculated without the NOL deduction (there was a temporary exception for 2018-2020) 2. In calculating the AMT NOL amount, you have to adjust for AMT preference items and adjustments 3. The presence of capital gains creates an additional layer of complexity because different rates apply Also worth noting that many tax software programs don't handle the AMT NOL carryforward interaction with capital gains correctly, which is likely why the IRS is adjusting your return.

Went through this exact issue last year! Capital gains trigger special treatment under AMT. Even with a large AMT NOL carryforward, you still gotta pay AMT on at least 10% of your AMTI because of that 90% limitation. Also, make sure your AMT basis in the assets sold is correct. If the regular tax basis and AMT basis are different (common with depreciated assets), that could explain why you're getting hit with AMT despite the NOL.

Maya, I feel your pain on this AMT nightmare! After dealing with similar issues for multiple clients, I've learned that AMT NOL carryforwards are one of the most misunderstood areas of tax law - even among seasoned practitioners. The key insight that helped me finally "get it" was understanding that AMT operates as a parallel tax system with its own set of rules. Your AMT NOL carryforward amount might be different from your regular NOL amount due to preference items and adjustments that were added back in the original loss year. Here's what I'd suggest checking: 1. Verify your AMT NOL carryforward amount is calculated correctly by reviewing the AMT adjustments from the original loss years 2. Confirm your tax software is applying the 90% limitation properly (many don't handle this correctly) 3. Check if there are any AMT basis differences in the assets you sold that could be creating additional AMT income I've found that manually calculating Form 6251 line by line often reveals discrepancies that software misses. The IRS adjustment you're seeing is probably legitimate if your software didn't account for these nuances properly. Consider getting a second opinion from a tax professional who specializes in AMT issues, as this area requires very specific technical knowledge that general practitioners often lack.

Maya, I completely understand your frustration! AMT NOL carryforwards are notoriously complex, and even experienced practitioners struggle with them. From what you've described, the issue likely stems from the 90% limitation rule that others have mentioned. Even with a substantial AMT NOL carryforward, you can only offset 90% of your Alternative Minimum Taxable Income in most cases, leaving at least 10% subject to AMT. Here's what I'd recommend as immediate next steps: 1. **Verify your AMT NOL amount**: Your AMT NOL carryforward might be different from your regular NOL due to preference items and adjustments that were made in the original loss years. Double-check those calculations. 2. **Review the capital gains treatment**: Long-term capital gains receive preferential rates under both regular tax and AMT, but the AMT exemption phase-out can effectively increase your overall tax burden when you have significant gains. 3. **Check for basis differences**: If you sold any assets that had different basis for AMT purposes (common with depreciated property), this could create additional AMT income that your NOL can't fully offset. 4. **Manual Form 6251 calculation**: I'd strongly suggest working through Form 6251 manually to see exactly where the AMT liability is coming from. Tax software often mishandles these complex interactions. The IRS Practitioner Priority Service agent's lack of knowledge isn't surprising - AMT NOL rules are highly technical. You might want to request escalation to a tax law specialist who can provide more detailed guidance on your specific situation.

Maya, I've dealt with this exact situation multiple times and it's maddening! The AMT NOL carryforward rules are incredibly complex and poorly understood, even by many tax professionals. Here's what's likely happening: Your AMT NOL carryforward can only offset 90% of your AMTI, so you'll always have some AMT liability when you have positive AMTI. But there's another layer - if you sold assets with different AMT basis (which is common with depreciated property), you're creating additional AMT income that might not be fully covered by your NOL. I'd recommend these steps: 1. **Recalculate your AMT NOL amount** - Go back to the original loss years and verify all AMT preference items were properly adjusted 2. **Check asset basis differences** - Any depreciated assets sold will likely have different AMT vs regular tax basis 3. **Manually complete Form 6251** - Don't trust the software on this one, work through it line by line 4. **Document everything** - Create detailed worksheets showing your calculations for the IRS response For getting better IRS help, ask the Practitioner Priority Service to transfer you to Technical Services or Appeals - they have specialists who actually understand AMT calculations. The general customer service agents are useless for complex issues like this. The good news is that once you understand how AMT NOLs interact with capital gains, you can plan better for future years. But yeah, this stuff is unnecessarily complicated!

Maya, I completely sympathize with your AMT frustration! This is one of the most confusing areas of tax law, and even experienced practitioners get tripped up by it regularly. From what you've described, it sounds like you're running into the classic AMT NOL limitation issue. Here's the key point that often gets missed: AMT NOL carryforwards can only offset 90% of your Alternative Minimum Taxable Income (with some exceptions for losses from 2018-2020). This means even with a substantial NOL, you'll still owe AMT on at least 10% of your AMTI. But there's likely another factor at play here - when you sold assets to generate that long-term capital gain, were any of them depreciated property? If so, you might have different basis amounts for AMT purposes versus regular tax purposes. This could be creating additional AMT income that wasn't fully accounted for in your NOL calculations. I'd strongly recommend manually working through Form 6251 line by line rather than relying on tax software for this calculation. Many programs don't handle the complex interaction between AMT NOLs and capital gains correctly, especially when depreciation adjustments are involved. For your IRS response, make sure to include detailed supporting worksheets showing exactly how you calculated your AMT NOL carryforward and how you applied the 90% limitation. The clearer your documentation, the better chance you have of resolving this without extended back-and-forth correspondence. This situation is fixable once you understand all the moving parts - hang in there!