Question 1

In 2019, the amount of the deduction for medical expenses for regular tax purposes may be different than for AMT
purposes.

Accepted Answer

A) True 
 B)False

Question 2

Brenda correctly has calculated her regular tax liability to be $32,500 and her tentative minimum tax (TMT) to be $36,300.Additionally, Brenda has an adoption expense credit (personal, nonrefundable credit) of $6,200.What is Brenda's total Federal income tax liability?

Accepted Answer

A) $26,300. 
B) $30,100. 
C) $32,500. 
D) $36,300. 
A) $26,300. 
B) $30,100. 
C) $32,500. 
D) $36,300.

Question 3

Which of the following statements describing the alternative minimum tax (AMT) is most correct?

Accepted Answer

A) Generally, those taxpayers most concerned about being in AMT are low income taxpayers who elect the standard deduction. 
B) The AMT was enacted in an attempt to limit the ability of taxpayers to engage in questionable tax planning activities. 
C) The goal of the AMT is to try to ensure that all taxpayers with economic income pay at least some income tax. 
D) None of these is true. 
A) Generally, those taxpayers most concerned about being in AMT are low income taxpayers who elect the standard deduction. 
B) The AMT was enacted in an attempt to limit the ability of taxpayers to engage in questionable tax planning activities. 
C) The goal of the AMT is to try to ensure that all taxpayers with economic income pay at least some income tax. 
D) None of these is true.

Question 4

In the current tax year David, a 32-year-old single taxpayer, reported itemized deductions of $24,500, composed of the following amounts. 
$6,000 of medical expenses (in excess of 10% of AGI)
$4,500 of property taxes on his home
$2,500 of investment expenses (not limited by investment income)
$3,000 of charitable contributions
$8,500 of home mortgage interest
Which of David's itemized deductions could create an AMT preference?

Accepted Answer

A) All of the itemized deductions potentially create an AMT preference. 
B) The deduction for medical expenses and property taxes potentially create an AMT preference. 
C) The deduction for investment expenses and property taxes potentially create an AMT preference. 
D) None of the itemized deductions potentially creates an AMT preference. 
A) All of the itemized deductions potentially create an AMT preference. 
B) The deduction for medical expenses and property taxes potentially create an AMT preference. 
C) The deduction for investment expenses and property taxes potentially create an AMT preference. 
D) None of the itemized deductions potentially creates an AMT preference.

Question 5

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

Accepted Answer

The AMT exemption amount can be thought

Question 6

Kerri, who has AGI of $120,000, itemized her deductions in the current year.She paid mortgage interest of $17,000 on her primary residence and $2,400 of interest on a home equity loan.The proceeds of the home equity loan were used to purchase a new minivan for her family.Kerri incurs a positive AMT adjustment of $19,400 in computing AMT.

Accepted Answer

A) True 
 B)False

Question 7

In 2019, Linda incurs circulation expenses of $240,000 that she deducts in calculating taxable income.
a.Calculate Linda's AMT adjustment for circulation expenses for 2019, 2020, 2021, and 2022.
b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2019.

Accepted Answer

a.Linda deducted the $240,000 circulatio

Question 8

When qualified residence interest exceeds qualified housing interest, the positive adjustment required in calculating AMT is a timing adjustment.That is, in the future, there will be an offsetting negative adjustment.Comment on the validity of this statement.

Accepted Answer

This AMT adjustment

Question 9

Vicki owns and operates a news agency (as a sole proprietorship).During 2019, 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 2019.In addition, Vicki incurred $15,000 in circulation expenditures in 2020 and again elected expense treatment.What AMT adjustments will be required in 2019 and 2020 as a result of the circulation expenditures?

Accepted Answer

A) $16,000 positive in 2019, $2,000 positive in 2020. 
B) $16,000 negative in 2019, $2,000 positive in 2020. 
C) $16,000 negative in 2019, $10,000 positive in 2020. 
D) $16,000 positive in 2019, $10,000 positive in 2020. 
A) $16,000 positive in 2019, $2,000 positive in 2020. 
B) $16,000 negative in 2019, $2,000 positive in 2020. 
C) $16,000 negative in 2019, $10,000 positive in 2020. 
D) $16,000 positive in 2019, $10,000 positive in 2020.

Question 10

Mitch, who is single and age 46 and has no dependents, had AGI of $100,000 this year.His potential itemized deductions were as follows. $$\begin{array} { l r } 
\text { Medical expenses (in excess of AGI floor) } & \$ 15,000 \
\text { State income taxes } & 3,000 \
\text { Real estate taxes } & 7,000 \
\text { Mortgage interest (acquisition of primary residence) } & 13,000 \
\text { Home equity loan interest (loan used to finance the } & 4,000 \
\text { purchase of a car) } & \
\text { Unreimbursed employee expenses } & 4,300
\end{array}$$ What is the amount of Mitch's AMT adjustment for itemized deductions for 2019?

Accepted Answer

A) $10,000. 
B) $12,300. 
C) $16,300. 
D) $34,300. 
A) $10,000. 
B) $12,300. 
C) $16,300. 
D) $34,300.

Question 11

What is the relationship between the regular income tax liability and the TMT?

Accepted Answer

If the TMT exceeds the regular

Question 12

Caroline and Clint are married, have no dependents, and file a joint return in 2019.Use the following information to calculate their Federal income tax liability.
 $$\begin{array} { l r } 
\text { AMTI } & \$ 985,000 \
\text { Regular income tax liability } & 121,129 \
\text { AMT preferences } & 190,000
\end{array}$$

Accepted Answer

None

Question 13

Because passive losses are not deductible in computing either taxable income or AMTI, no AMT adjustment for passive losses is required.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

In converting regular taxable

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Kay claimed percentage depletion of $119,000 for the current year for regular income tax purposes.Cost depletion would have been $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 preference in computing AMTI.

Accepted Answer

A) True 
 B)False

Question 17

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%, 50%, and 60%) may be applied to a different base amount.

Accepted Answer

A) True 
 B)False

Question 18

Arlene, who is single and itemizes deductions, reports taxable income for 2019 of $612,000.
Calculate her alternative minimum tax, if any, given the following additional information. $$\begin{array}{l}
\text { AMT adjustments }\
\begin{array} { c c } 
\text { Positive } & \$ 22,000 \
\text { Negative } & ( 25,000 ) \
\text { Tax preferences } & 146,000
\end{array}
\end{array}$$

Accepted Answer

None

Question 19

In deciding whether to enact the alternative minimum tax, Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

Accepted Answer

A) True 
 B)False

Question 20

Ashby, who is single and age 30, provides you with the following information from his financial records for 2019. $$\begin{array} { l l } 
\text { Regular income tax liability } & \$ 78,444 \
\text { AMTI } & 525,000 \
\text { Taxable income } & 295,000
\end{array}$$ Calculate his AMT exemption for 2019.

Accepted Answer

A) $0 
B) $3,675 
C) $68,025 
D) $71,700 
A) $0 
B) $3,675 
C) $68,025 
D) $71,700

In 2019, the amount of the deduction for medical expenses for regular tax purposes may be different than for AMT purposes.

Brenda correctly has calculated her regular tax liability to be $32,500 and her tentative minimum tax (TMT) to be $36,300.Additionally, Brenda has an adoption expense credit (personal, nonrefundable credit) of $6,200.What is Brenda's total Federal income tax liability?

Which of the following statements describing the alternative minimum tax (AMT) is most correct?

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

In 2019, Linda incurs circulation expenses of $240,000 that she deducts in calculating taxable income. a.Calculate Linda's AMT adjustment for circulation expenses for 2019, 2020, 2021, and 2022. b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2019.

When qualified residence interest exceeds qualified housing interest, the positive adjustment required in calculating AMT is a timing adjustment.That is, in the future, there will be an offsetting negative adjustment.Comment on the validity of this statement.

What is the relationship between the regular income tax liability and the TMT?

Caroline and Clint are married, have no dependents, and file a joint return in 2019.Use the following information to calculate their Federal income tax liability. AMTI \ 985,000 Regular income tax liability 121,129 AMT preferences 190,000

Because passive losses are not deductible in computing either taxable income or AMTI, no AMT adjustment for passive losses is required.

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

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

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%, 50%, and 60%) may be applied to a different base amount.

Arlene, who is single and itemizes deductions, reports taxable income for 2019 of $612,000. Calculate her alternative minimum tax, if any, given the following additional information. AMT adjustments Positive \ 22,000 Negative (25,000) Tax preferences 146,000

In deciding whether to enact the alternative minimum tax, Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

Ashby, who is single and age 30, provides you with the following information from his financial records for 2019. Regular income tax liability \ 78,444 AMTI 525,000 Taxable income 295,000 Calculate his AMT exemption for 2019.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basic Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

Exam 12: Alternative Minimum Tax

In 2019, the amount of the deduction for medical expenses for regular tax purposes may be different than for AMT purposes.

Brenda correctly has calculated her regular tax liability to be $32,500 and her tentative minimum tax (TMT) to be $36,300.Additionally, Brenda has an adoption expense credit (personal, nonrefundable credit) of $6,200.What is Brenda's total Federal income tax liability?

Which of the following statements describing the alternative minimum tax (AMT) is most correct?

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

In 2019, Linda incurs circulation expenses of $240,000 that she deducts in calculating taxable income. a.Calculate Linda's AMT adjustment for circulation expenses for 2019, 2020, 2021, and 2022. b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2019.

When qualified residence interest exceeds qualified housing interest, the positive adjustment required in calculating AMT is a timing adjustment.That is, in the future, there will be an offsetting negative adjustment.Comment on the validity of this statement.

What is the relationship between the regular income tax liability and the TMT?

Caroline and Clint are married, have no dependents, and file a joint return in 2019.Use the following information to calculate their Federal income tax liability. AMTI \ 985,000 Regular income tax liability 121,129 AMT preferences 190,000

Because passive losses are not deductible in computing either taxable income or AMTI, no AMT adjustment for passive losses is required.

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

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

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%, 50%, and 60%) may be applied to a different base amount.

Arlene, who is single and itemizes deductions, reports taxable income for 2019 of $612,000. Calculate her alternative minimum tax, if any, given the following additional information. AMT adjustments Positive \ 22,000 Negative (25,000) Tax preferences 146,000

In deciding whether to enact the alternative minimum tax, Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

Ashby, who is single and age 30, provides you with the following information from his financial records for 2019. Regular income tax liability \ 78,444 AMTI 525,000 Taxable income 295,000 Calculate his AMT exemption for 2019.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basic Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters