Exam 15: Alternative Minimum Tax

Prior to the effect of the tax credits, Justin's regular income tax liability is $200,000 and his tentative AMT is $195,000. Justin has the following credits: Child tax credit $1,000 Adoption expenses credit 5,000 Calculate Justin's tax liability after credits.

Use the following selected data to calculate Devon's taxable income. Tax preferences $ 45,000 Positive AMT adjustments 52,000 Negative AMT adjustments 15,000 AMTI 290,000

Beula, who is a head of household and age 40, provides you with the following information from her financial records for 2014. Regular income tax liability \ 35,776 AMT positive adjustments 33,000 AMT preferences 25,000 Taxable income 170,000 Calculate her AMTI for 2014.

Kay had percentage depletion of $119,000 for the current year for regular income tax purposes. Cost depletion was $60,000. Her basis in the property was $90,000 at the beginning of the current year. Kay must treat the percentage depletion deducted in excess of cost depletion, or $59,000, as a tax preference in computing AMTI.

Dale owns and operates Dale's Emporium as a sole proprietorship. On January 30, 1998, Dale's Emporium acquired a warehouse for $100,000. For regular income tax purposes in 2014, depreciation was deducted under MACRS using a rate of 2.564%. Determine the AMT adjustment for depreciation and indicate whether it is positive or negative.

Melinda is in the 35% marginal tax bracket. She has a net capital gain of $150,000 on the sale of land which is eligible for the alternative tax on net capital gain in calculating the regular income tax. Discuss the tax rate that applies to the $150,000 net capital gain in calculating the tentative AMT for Melinda.

The recognized gain for regular income tax purposes and the recognized gain for AMT purposes on the sale of stock acquired under an incentive stock option (ISO) program are always the same because the adjusted basis is the same.

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year. Cost depletion is $19,000. The property qualifies for a 15% depletion rate. Gross income from the property was $200,000 and net income before the percentage depletion deduction was $50,000. What is Eula's tax preference for excess depletion?

Kay, who is single, had taxable income of $0 in 2014. She has positive timing adjustments of $206,300 and exclusion items of $100,000 for the year. What is the amount of her alternative minimum tax credit for carryover to 2015?

If the taxpayer elects to capitalize intangible drilling costs and to amortize them over a 3-year period for regular income tax purposes, there is no adjustment or preference for AMT purposes.

In 2014, Blake incurs $270,000 of mining exploration expenditures, and deducts the entire amount for regular income tax purposes. Which of the following statements is correct?

Are the AMT rates for the individual taxpayer the same as those for a corporate taxpayer?

If Abby's alternative minimum taxable income exceeds her regular taxable income, she will have an alternative minimum tax.

Sand Corporation, a calendar year taxpayer, has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE)] of $900,000 for 2014. If Sand's (ACE) is $975,000, its tentative minimum tax for 2014 is:

Paul incurred circulation expenditures of $180,000 in 2014 and deducted that amount for regular income tax purposes. Paul has a $60,000 negative AMT adjustment for 2015, 2016, and for 2017.

What is the relationship between the regular income tax liability and the tentative AMT?

Lavender, Inc., incurs research and experimental expenditures of $210,000 in 2014. Determine the amount of the AMT adjustment for 2014 and for 2015 if for regular income tax purposes: a. Lavender expenses the research and experimental expenses. b. Lavender capitalizes the research and experimental expenses and elects to amortize them over a 10-year period.

Interest on a home equity loan cannot be deducted for AMT purposes.

Nell has a personal casualty loss deduction of $14,500 for regular income tax purposes. The deduction would have been $26,600, but it had to be reduced by $100 and by $12,000 (10% × $120,000 AGI). For AMT purposes, the casualty loss deduction also is $14,500.

Since most tax preferences are merely timing differences, they eventually will reverse and net to zero.