This section contains the nature of the case and procedural background.

Ps were the parents of ten dependent children. Ps earned an adjusted gross income (AGI) of $83,056.42. On Schedule A, the Klaassens claimed deductions for medical expenses and state and local taxes in the respective amounts of $4,767.13 and $3,263.56. Including their claimed deductions for interest and charitable contributions, their total Schedule A itemized deductions equaled $19,563.95. Therefore, they subtracted that amount from their AGI, and on line 35 of their Form 1040, they showed a balance of $63,492.47. On line 36, they entered a total of $29,400 for twelve personal exemptions-one each for themselves and their ten children. After subtracting that amount, they showed a taxable income of $34,092.47 on line 37 of their Form 1040, and a resulting regular tax of $5,111.00 on line 38. They did not provide any computations for AMT liability. The IRS issued a notice of deficiency, advising the Klaassens that they were liable for a $1,085.43 AMT pursuant to I.R.C. §§ 55-59. Specifically, the IRS concluded that, in the Klaassens' case, I.R.C. §§ 55-56 required three specific adjustments, or increases, to the taxable income which they showed on line 37 of their Form 1040. According to the IRS's interpretation, subsection 56(b)(1)(A)(ii) required the entire $3,263.56 deduction for state and local taxes to be added back. Next, subsection 56(b)(1)(B) reduced the deduction allowable for medical expenses by setting a 10% floor in lieu of the 7.5% floor normally allowed under §213(a)-resulting in a net adjustment of $2,076.41. Finally, § 56(b)(1)(E) deprived the Klaassens of the entire $29,400 deduction they claimed on line 36 of their Form 1040. After adjusting the taxable income by these three amounts, the IRS set the alternative minimum taxable income at $68,832.44. After deducting the $45,000 exemption, the tentative minimum tax was computed on the excess: 26% x $23,832.44 = $6,196.43. The difference between that figure and the Klaassens' regular tax was $1,085.43. The Tax Court affirmed, and Ps appealed.

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