Life is unfair, and the tax law often becomes part of that unfairness. But the mere fact that a result may be unfair is not enough to change its result as the taxpayer discovered in the case of Vargas v. Commissioner, TC Summary Opinion 2015-69.
Mr. Vargas filed a married filing separate return for 2013, reporting total adjusted gross income of $67,045, exemptions for himself and his son of $7,800 and itemized deductions that included $40,978 of employee business expenses. Mr. Vargas was a pilot flying internationally was expected to incur significant unreimbursed expenses.
Mr. Vargas prepared his return showing taxable income of $18,975, with an income tax of $2,400. He did not report any liability for the alternative minimum tax and did not attach a Form 6251.
That presented a problem since both the exemptions and the employee business expenses are not allowed deductions in computing the alternative minimum tax. The IRS did, however, compute the alternative minimum tax after taking into account those two adjustments and billed Mr. Vargas for an additional $4,363.
The Court noted Mr. Vargas’ defense against the adjustment that he took to court as follows:
In challenging respondent's determination, petitioner alleges that the alternative minimum tax does not apply to commercial pilots -- particularly international airline pilots -- because it fails to take into account the type of expenses that pilots are obliged to incur in practicing their profession.
Unfortunately, the Court notes that whether or not Congress should have allowed this to be taken into account, the reality was that Congress did not. And, therefore, Mr. Vargas owed the tax.
As the Court noted:
However unfair this statute might seem to petitioner, the Court is bound to apply the law as written, see Estate of Cowser v. Commissioner, 736 F.2d 1168, 1171-1174 (7th Cir. 1984), aff'g 80 T.C. 783 (1983), as the statute applies to all taxpayers without regard to their profession or their "special circumstances".