7947 / Do mutual fund dividends give rise to tax preference items for purposes of the alternative minimum tax?

The receipt of an exempt-interest dividend creates a tax preference to the extent that the dividend is derived from interest paid on certain private activity bonds issued after August 7, 1986 (see Q 777).¹ (The receipt of capital gain and ordinary income mutual fund dividends generally does not create tax preferences.) Also, mutual funds do pass through, and each shareholder must report a proportionate share of, the fund’s own tax preference items.²

For an explanation of the alternative minimum tax, see Q 777.

1.  IRC § 57(a)(5)(B).

2.  IRC § 59(d).