Exam 15: Alternative Minimum Tax

Kerri, who had AGI of $120,000, itemized her deductions in the current year. She incurred unreimbursed employee business expenses of $8,500. Kerri must make a positive AMT adjustment of $2,400 in computing AMT.

Under what circumstances are corporations exempt from the AMT?

In calculating the AMT using the indirect method, do AMT adjustments and AMT tax preferences increase or decrease AMTI?

A taxpayer has a passive activity loss for the current tax year for regular income tax purposes and for AMT purposes. Is it possible that the passive activity losses will be the same amount?

Jackson sells qualifying small business stock for $125,000 (adjusted basis of $105,000) in 2013. In calculating gross income for regular income tax purposes, he excludes all of his realized gain of $20,000. The $20,000 exclusion is a tax preference in calculating Jackson's AMTI.

Cher sold undeveloped land that originally cost $150,000 for $225,000. There is a positive AMT adjustment of $75,000 associated with the sale of the land.

Mauve, Inc., has the following for 2012, 2013, and 2014 and no prior ACE adjustments. 2012 2013 2014 Pre-adjusted AMTI \ 12,000 \ 15,000 \ 8,000 Adjusted current earnings 10,000 17,000 5,000 What is the ACE adjustment for each of the three years? 2012 2013 2014

Darin's, who is age 30, has itemized deductions in calculating 2014 taxable income as follows: Medical expenses [\ 15,000-10\%(\ 100,000)] \ 5,000 Mortege interest on personal residence 7,000 State income taxes 4,000 Real property taxes 4,500 Personal property taxes 2,500 Casualty loss [\ 14,000-(10\%\times\ 100,000)] 4,000 Charitable contributions 3,500 Gambling los5es ( \3 ,200 limited to gambling income of \ 1,000) 1,000 Miscellaneous itemized deductions [\ 2,500-2\%(\ 100,000)] 500 Itemized deductions \ 32,000 a. Calculate Darin's itemized deductions for AMT purposes using the direct method. b. Calculate Darin's itemized deductions for AMT purposes using the indirect method.

Interest income on private activity bonds issued before 2009 and after 2010, reduced by expenses incurred in carrying the bonds, is a tax preference item that is included in computing AMTI.

Which of the following statements is correct?

Assuming no phaseout, the AMT exemption amount for a married taxpayer filing separately for 2014 is more than the AMT exemption amount for C corporations.

Vinny's AGI is $250,000. He contributed $200,000 in cash to the Boy Scouts, a public charity. What is Vinny's charitable contribution deduction for AMT purposes?

Andrea, who is single, has a personal exemption deduction in calculating her 2014 taxable income. She has no dependency deductions. What is the amount of the AMT adjustment in calculating AMTI?

Income from some long-term contracts can be reported using the completed contract method for regular income tax purposes, but the percentage of completion method is required for AMT purposes for all long-term contracts.

What is the purpose of the AMT exemption amount? What is the maximum amount for each filing status for an individual taxpayer and for a corporate taxpayer?

Which of the following statements is correct?

Negative AMT adjustments for the current year caused by timing differences are offset by the positive AMT adjustments for prior tax years also caused by timing differences.

Certain adjustments apply in calculating the corporate AMT that do not apply in calculating the noncorporate AMT and certain adjustments apply in calculating the noncorporate AMT that do not apply in calculating the corporate AMT.

The corporate AMT no longer applies.

Ashby, who is single and age 30, provides you with the following information from his financial records for 2014. Regular income tax liability \ 47,228 AMT positive adjustments 40,000 AMT preferences 20,000 Taxable income 195,000 Calculate his AMT exemption for 2014.