Exam 12: Alternative Minimum Tax

Benita expensed mining exploration and development costs of $500,000 incurred in the current tax year.She will be required to make negative AMT adjustments for each of the next 10 years.

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?

If the AMT base is greater than $194,800, the AMT rate for an individual taxpayer is the same as the AMT rate for married taxpayer, filing jointly.

Ted, who is single, owns a personal residence in the city.He also owns a condo near the ocean.He uses the condo as a vacation home.In March, he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During the year, he paid the following amounts of interest. On his personal residence \ 15,500 On his condo 6,200 On the home equity loan 4,800 On credit card obligations 1,700 What amount, if any, must Ted recognize as an AMT adjustment in 2019?

Robin, who is a head of household and age 42, provides you with the following information from his financial records for 2019.Robin itemizes deductions. Regular income tax liability \ 142,125 PositiveAMT adjustments 30,000 AMT preferences 100,000 Taxable income 481,000 Calculate Robin's AMT for 2019.

Why does Congress see a need for a second tax system called the alternative minimum tax?

Discuss the tax year in which an AMT adjustment is first required for an incentive stock option (ISO).

The net capital gain included in an individual taxpayer's AMT base is eligible for the lower tax rate on net capital gain.This favorable alternative rate applies in calculating both the regular income tax and the AMT.

In 2019, Brenda has calculated her regular tax liability to be $32,500 and her tentative minimum tax (TMT) to be $36,300.Additionally, Brenda holds an alternative minimum tax credit of $6,200 from 2015. What is Brenda's total 2019 Federal income tax liability?

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes, there will be an AMT adjustment.

Lilly is single and reports zero taxable income for 2019.She incurs positive AMT timing adjustments of $600,000 and AMT preferences of $200,000. a.Calculate Lilly's tentative minimum tax (TMT). b.Calculate Lilly's AMT credit carryover to 2020.

Dale owns and operates Dale's Emporium as a sole proprietorship.On January 30, 2005, Dale's Emporium acquired a warehouse for $100,000.In 2019, for regular tax purposes, the MACRS depreciation deduction was calculated using a 2.564% rate.Determine the AMT adjustment for depreciation and indicate whether it is positive or negative.

Keosha acquires used 10-year personal property to use in her business in 2019 and uses MACRS depreciation for regular income tax purposes, even though the asset is eligible for full expensing.As a result, Keosha will incur a positive AMT adjustment in 2019, because AMT depreciation is slower.

Assuming no phaseout, the AMT exemption amount for a married taxpayer filing separately for 2019 is exactly half of the AMT exemption amount for an individual taxpayer.

Wallace owns a construction company that builds both commercial and residential buildings.He contracts to build a residential building for $800,000, and 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 gross income on the contract.Under the percentage of completion method, the income recognized under the contract would have been $60,000.Wallace's AMT effect is:

On February 1, 2019, Omar acquires used 7-year personal property for 100,000.The property will be used in his business.Omar does not elect § 179 expensing, but he does take the maximum regular tax depreciation deduction.As a result, Omar incurs a positive AMT adjustment in 2019 of what amount?

Do AMT adjustments and AMT preferences increase or decrease AMTI?

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

Business tax credits reduce the AMT and the regular income tax in the same way.

Paul incurred circulation expenditures of $180,000 in 2019 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for each of 2020, 2021, and for 2022.