Exam 15: Alternative Minimum Tax

Is it possible that no AMT adjustment is necessary for medical expenses in calculating AMTI for a taxpayer who is at least age 65 even though the floor limitation is different (7.5% of AGI for regular income tax compared to 10% for AMT purposes)?

Beige, Inc., has AMTI of $200,000. Calculate the amount of the AMT exemption if: a. Beige is a small corporation for AMT purposes. b. Beige is not a small corporation for AMT purposes.

Why is there a need for a second tax system called the alternative minimum tax?

Discuss the tax year in which an AMT adjustment is first required for an ISO.

The net capital gain included in an individual taxpayer's AMT base is eligible for the beneficial alternative tax rate on net capital gain. This favorable alternative rate applies both in calculating the regular income tax and the AMT.

Ashly is able to reduce her regular income tax liability from $47,000 to $43,500 as the result of the alternative tax on net capital gain. Ashly's tentative AMT is $51,000.

What effect do deductible gambling losses for regular income tax purposes have in calculating AMTI?

The required adjustment for AMT purposes for pollution control facilities placed in service in 2014 is equal to the difference between the amortization deduction allowed for regular income tax purposes and the depreciation deduction computed under ADS.

In 2014, Linda incurs circulation expenses of $240,000 which she deducts in calculating taxable income. a. Calculate Linda's AMT adjustment for circulation expenses for 2014, 2015, 2016, and 2017. b. Advise Linda on how she could reduce or eliminate the AMT adjustment in 2014.

The AMT exemption for a C corporation is $50,000 reduced by 25% of the amount by which AMTI exceeds $150,000.

In the current tax year, Ben exercised an incentive stock option (ISO), acquiring stock with a fair market value of $190,000 for $170,000. His AMT basis for the stock is $170,000, his regular income tax basis for the stock is $170,000, and his AMT adjustment is $0 ($170,000 - $170,000).

The deduction for charitable contributions in calculating the regular income tax can differ from that in calculating the AMT because the percentage limitations (20%, 30%, and 50%) may be applied to a different base amount.

Elmer exercises an incentive stock option (ISO) in 2014 for $6,000 (fair market value of the stock on the exercise date is $7,600). If Elmer sells the stock later in 2014 for $8,000, the AMT positive adjustment is $1,600 and the AMT negative adjustment is $2,000.

Prior to the effect of tax credits, Eunice's regular income tax liability is $325,000 and her tentative AMT is $312,000. Eunice has general business credits available of $20,000. Calculate Eunice's tax liability after tax credits.

Danica owned a car that she used exclusively for business. The car was purchased in 2010 and sold in 2014 for a recognized gain of $9,000. However, the sale resulted in no AMT. Why?

Which of the following statements is correct?

Keosha acquires 10-year personal property to use in her business in 2014 and takes the maximum cost recovery deduction for regular income tax purposes. As a result of this, Keosha will have a positive AMT adjustment in 2014.

Business tax credits reduce the AMT and the regular income tax in the same way.

Bianca and David have the following for 2014: Regular income tax before credits $32,000 Tentative AMT before credits 45,000 a. Calculate Bianca and David's AMT if they qualify for the adoption expense credit of $11,000. b. Calculate Bianca and David's AMT if they qualify for the adoption expense credit of $13,190.

In June, Della purchases a building for $800,000 to use in her business as an office building. Della uses the depreciation method which will provide her with the greatest deduction for regular income tax purposes. a. Calculate the AMT adjustment for depreciation in 2014 if Della purchased the building in 2014. b. Calculate the AMT preference for depreciation in 2014 if Della purchased the building in 1986.