In Year 1, person itemizes deductions and is in the AMT.
In Year 2, person gets a $500 state income tax refund. However, because of the AMT, even if his Year 1 state income tax deduction had been $500 lower, his tax liability would have been exactly the same. Question -- since taxpayer got no benefit from the "excess" $500 Year 1 deduction, can the $500 refund be excluded in Year 2? If so, how do you properly show that the refund should not be including? Just don't put it on the return and be prepared to trade letters with the IRS?
-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us