Exam 15: Alternative Minimum Tax

Lilly is single and has no taxable income for 2014. She has positive timing adjustments of $600,000 and AMT exclusions of $200,000. a. Calculate Lilly's tentative AMT. b. Calculate Lilly's AMT credit carryover to 2015.

Prior to the effect of tax credits, Clarence's regular income tax liability is $200,000 and his tentative AMT is $180,000. Clarence has nonrefundable business tax credits of $35,000. His tax liability is $165,000.

Will all AMT adjustments reverse? That is, do they relate to timing differences?

Tad and Audria, who are married filing a joint return, have AMTI of $256,000 for 2014. Calculate their AMT exemption.

The AMT calculated using the indirect method will produce a different amount than the AMT calculated using the direct method.

How can the positive AMT adjustment for research and experimental expenditures be avoided?

AMT adjustments can be positive or negative, whereas AMT preferences are always positive.

What tax rates apply in calculating the tentative AMT for an individual taxpayer?

A taxpayer who expenses circulation expenditures in the year incurred for regular income tax purposes will have a positive AMT adjustment in the following year.

Crimson, Inc., provides you with the following information: Regular corporate tax liability \2 2,250 AMT adjustments and preferences (excluding ACE adjustment) 80,000 ACE adjustment (prior positive adjustments are \ 17,000 ) (11,000) Taxable income 100,000 $\text { Calculate Crimenn's } A M T \text { for } 2014$

What is the relationship between taxable income and AMTI?

What itemized deductions are allowed for both regular income tax purposes and for AMT purposes?

Celia and Christian, who are married filing jointly, have one dependent and do not itemize deductions. They have taxable income of $82,000 and tax preferences of $53,000 in 2014. What is their AMT base for 2014?

The AMT adjustment for mining exploration and development costs can be avoided if the taxpayer elects to write off the expenditures in the year incurred for regular income tax purposes, rather than writing off the expenditures over a 10-year period for regular income tax purposes.

Which of the following statements is incorrect?

Vicki owns and operates a news agency (as a sole proprietorship). During 2014, she incurred expenses of $24,000 to increase circulation of newspapers and magazines that her agency distributes. For regular income tax purposes, she elected to expense the $24,000 in 2014. In addition, Vicki incurred $15,000 in circulation expenditures in 2015 and again elected expense treatment. What AMT adjustments will be required in 2014 and 2015 as a result of the circulation expenditures?

Wallace owns a construction company that builds both commercial and residential buildings. He contracts to build a residential building for $800,000 for which he is eligible to use the completed contract method of accounting. In the current year for regular income tax purposes, Wallace does not recognize any income on the contract. Under the percentage of completion method, the income recognized under the contract would have been $60,000. Wallace's AMT adjustment is:

Akeem, who does not itemize, incurred a net operating loss (NOL) of $50,000 in 2013. His deductions in 2013 included AMT tax preference items of $20,000, and he had no AMT adjustments. Assuming the NOL is not carried back, what is Akeem's ATNOLD carryover to 2014?

Which of the following can produce an AMT preference rather than an AMT adjustment?

If a taxpayer deducts the standard deduction in calculating regular taxable income, what effect does this have in calculating AMTI?