Exam 12: Alternative Minimum Tax

Dale owns and operates Dale's Emporium as a sole proprietorship. On January 30, 2004, Dale's Emporium acquired a warehouse for $100,000. For regular income tax purposes in 2018, depreciation was deducted under MACRS using a 2.564% rate. Determine the AMT adjustment for depreciation and indicate whether it is positive or negative.

Which of the following statements concerning capital gains and losses and the AMT is correct?

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

Marvin, the vice president of Lavender, Inc., exercises stock options for 100 shares of stock in March 2018. The stock options are incentive stock options ISOs). Their exercise price is $20 and the fair market value on the date of exercise is $28. The options were granted in March 2014 and all restrictions on the free transferability had lapsed by the exercise date.

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

In the current tax year, for regular tax purposes, Avery reports $65,000 of income and $190,000 of deductions from passive activities. For AMT purposes, the passive activity income amount is unchanged, but deductions from passive activities total $150,000. What is Avery's suspended passive loss for regular tax and for AMT purposes?

Elmer exercises an incentive stock option ISO) in March for $6,000 fair market value of the stock on the exercise date is $7,600). If Elmer sells the stock in November of the same tax year for $8,000, he reports a $1,600 AMT adjustment for the year.