Children and the AMT

Saved by the Kiddie Tax

Donald Morris, PhD, CPA, CFE, CFP

Every tax season, practitioners are surprised by some new combination of tax-relevant circumstances. This year in the author's practice it was a 17-year-old boy faced with paying the alternative minimum tax (AMT). Admittedly, it was an unusual set of conditions, obviously unforeseen by Congress in formulating this infamous tax. When the AMT was conceived—then just the “minimum tax,” instituted by the Tax Reform Act of 1969—it was in response to reports of a small number of wealthy individuals and corporations paying little or no income tax. Though these taxpayers had reduced their taxable incomes through judicious—but legal—tax planning, this was seen by many as unfair. The 1969 minimum tax was intended to ensure that wealthy taxpayers would pay at least some tax in spite of their use of tax shelters and other tax preference items.