Subject: ISO AMT Comment: Paul Sander, Individual (ReformAMT.org) 186 College Ave. Mountain View, CA 94040 Telephone: 650-254-1296 The President's Advisory Panel on Federal Tax Reform 1440 New York Avenue NW Suiite 2100 Washington, DC 20220 March 17, 2005 Paul Sander 186 College Ave. Mountain View, CA 94040 The President's Advisory Panel on Federal Tax Reform 1440 New York Avenue NW Suiite 2100 Washington, DC 20220 March 17, 2005 Ladies and Gentlemen of the Panel, Thank you for this opportunity to share with you my unfavorable experience with the Alternative Minimum Tax (AMT). It is my hope that my statement will help lead to a more fair and just tax system. I live in a modest home in a working class neighborhood. I own a home and have a first mortgage and a home equity loan on which I make payments every month, which account for about 45% of my take-home pay. The aggregate of my payments is below the current median mortgage payment in my county. My current tax liability is more than double the value of my home, and the IRS has a lien against it. My current tax liability is also nearly eight times the amount of my annual gross salary. If I were to sell my home today, my proceeds from the sale would account for only about 1/32 of my tax liability. This is after I have liquidated all of my assets except for my personal belongings (clothes, car, computer, etc.). The assets sold were properties owned jointly with my former domestic partner. The liquidation was done when we parted company. My tax liability was a factor in the decision to split, but it was not the only reason. Paul Sander I filed for Chapter 7 bankruptcy in December when the IRS garnished my salary and I was no longer able to make payments on my home and credit cards, or even to buy enough food and fuel to live, commute to work, and stay warm during the winter. I'm about to come out of bankruptcy, but the tax lien, which applies to all of my current property and to all property that I might acquire in the future, will survive these procedings. I've yet to hear whether or not my secured debtors (the mortgage company and the IRS) will object to the discharge of my liabilities. My tax liability was incurred during tax year 2000. The amount of my tax liability at this time is over $950,000. This is after having paid some $400,000 during 2000, and $451,000 with the sale of assets last year, and accruing penalties and interest at a rate of about $10,000/month (an amount that is well above my take-home salary) for four years. Now here's the interesting part. According to line 26 of my form 8801 filed last year, I have a minimum tax credit of more than $771,000. According to line 16 of my Schedule D filed last year, I have an AMT capital loss credit of over $3 million. If I understand this correctly, I have already paid my taxes four times over, and yet I'm in bankruptcy and am about to lose my home. How did I get into this situation? Like many high-tech workers during the 1990's, my employer gave me incentive stock options. I made a sizable exercise during 2000, near the time of the peak of the stock market. After that time, the value of my stock fell more than 99.9% and left me with no way to pay the alternative minimum tax. I had hired a tax consultant years prior to that for the specific reason to keep me out of AMT trouble, but that expert failed to inform me of the upcoming liability when we did my year-end tax planning in December of 2000. She assured me that I would receive a sizeable Paul Sander refund. But that refund never materialized; in April of 2001, she informed me that I had a 7-figure tax liability with the feds alone. (California state taxes made the situation even worse.) In addition to myself, others have been profoundly affected by my situation. I mentioned earlier my former domestic partner. We split after a twelve year relationship. This was a rather complicated and prolonged break-up for a number of reasons. First, I was supporting her and her elderly mother who was in poor health. Second, we had commenced to build our dream home in 1999, before the tax liability appeared. All of the bills related to these situations were huge, as you can imagine. As the money ran out, I liquidated my savings and retirement plans while we raced to finish the house for the purpose of either living in it (and liquidating other assets) or selling it. As my resources depleted, we had to abandon my partner's mother. She had worked for many years for the state of Arizona, and we moved her back to the Phoenix area because her state health and retirement benefits were much better there than they were when she lived out of state (i.e. here in California). After the move, her health deteriorated so quickly that she died four months later. My partner also descended into mental illness and is unable to support herself. After the sale of our assets, she left California. She currently has assets but she's also in debt. She is in a downward spiral from which I doubt she will ever recover. My mother has reached retirement age. I'm her only heir, and my situation is affecting her own retirement and post-mortem planning. She cannot have me in her will because she won't have her property fall to the IRS. She works in the high-tech industry also, and she won't touch the stock market in any way, least of all her stock options and ESPP plan. She's even considering leaving her husband and expatriating in protest. In the meantime, my life is on hold. I cannot even hope to marry while this hangs over me because I will not entangle a loved one in this nightmare. My plan at this time is to continue my effort to escape this rediculous situation. My tax attorney has prepared a lawsuit against the IRS to accelerate collection of some of my credits, that I may persue as resources permit. I will also continue to abandon things (my home, my country, my life) as needed, despite the emotional toll. You read that right. As with others in my situation, my own death is a contingency plan in the event that I can't escape this legally. Since April of 2001, I know of one suicide in California, and one murder-suicide in Texas that can already be attributed to AMT. Although it's not spoken of openly, I hear rumors that others have similar plans. Folks, remember the Stamp Act and the Tea Tax. These were so bad that a great many people took up arms in rebellion against the government. An ancestor of mine fought beside Washington at Valley Forge. Not to belittle the great sacrifice made by our founding fathers, but as bad as those taxes were, they were temporary taxes that people could actually afford to pay. The AMT, in contrast, is permanent tax that perpetually increases its scope, and it is literally crushing people to death. Please, abolish the AMT. Its basis is predatory and poorly conceived. We're one people, we should have one tax code, not alternatives that apply to different classes. Change the collection process so that existing credits can be applied in full to new and existing liabilities, rather than forcing financial ruin upon those who have large stockpiles of credits. And for those of us who have already lost everything, offer refunds so that we can replace our homes and resume our mortgages as of the time we were forced to sell. Paul Sander Thank you very much for your time and attention. I look forward to seeing the results of your efforts to reform our tax system into one that is much more fair and just. Sincerely yours, Paul M. Sander |