Exam 17: Business Tax Credits and the Alternative Minimum Tax

All taxpayers are eligible to take the basic research credit.

A U.S.taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

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.

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

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?

Cher sold undeveloped land that originally cost $150,000 for $225,000.A positive AMT adjustment of $75,000 is required as a result of the sale.

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

Qualified rehabilitation expenditures include the cost of acquiring a building, but not the cost of acquiring the land.

The required adjustment for AMT purposes for pollution control facilities placed in service this year is equal to the difference between the amortization deduction allowed for regular income tax purposes and the depreciation deduction computed under ADS.

In working with the foreign tax credit, a U.S.corporation may be able to alleviate the problem of excess foreign taxes by:

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

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.

Evan is a contractor who constructs both commercial and residential buildings.Even though some of the contracts could qualify for the use of the completed contract method, Evan decides to use the percentage of the completion method for all of his contracts.This increases his AMT adjustment associated with long-term contracts for the current year.

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.

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

Roger is considering making a $6,000 investment in a venture that its promoter promises will generate immediate tax benefits for him.Roger, who does not anticipate itemizing his deductions, is in the 30% marginal income tax bracket.If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will Roger's tax liability decline because of the investment?

Some (or all) of the tax credit for rehabilitation expenditures is recaptured if the rehabilitated property is disposed of prematurely or if it ceases to be qualifying property.

A LIFO method is applied to general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.

Madge's tentative minimum tax (TMT) is $112,000.Her regular income tax liability is $99,000.Madge's AMT is $13,000.

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.