Exam 15: Alternative Minimum Tax

Lilly is single and has no taxable income for 2015.She has positive timing adjustments of $600,000 and AMT exclusions of $200,000. ​ a.​ Calculate Lilly's tentative minimum tax. b.Calculate Lilly's AMT credit carryover to 2016.

What is the relationship between taxable income and AMTI?

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

Sage,Inc. ,has the following gross receipts and taxable income: Gross receipts Taxable income 2003 $5,600,000 $120,000 2004 4,300,000 190,000 2005 7,200,000 162,000 2006 9,000,000 180,000 2007 6,200,000 150,000 2008 6,500,000 160,000 2009 6,800,000 162,000 2010 7,000,000 154,000 2011 7,200,000 190,000 2012 7,100,000 200,000 2013 7,300,000 185,000 2014 7,200,000 201,000 2015 7,000,000 225,000 Is Sage,Inc. ,subject to the AMT in 2015?

Lavender,Inc. ,incurs research and experimental expenditures of $210,000 in 2015.Determine the amount of the AMT adjustment for 2015 and for 2016 if for regular income tax purposes: ​ a.Lavender expenses the research and experimental expenses. b.Lavender capitalizes the research and experimental expenses and elects to amortize them over a 10-year period.

In calculating her 2015 taxable income,Rhonda,who is age 45,claims the following itemized deductions. Medical expenses [$6,500 - 10%($60,000)] $ 500 State income taxes 2,500 Property taxes 3,000 Home mortgage interest on principal residence 5,000 Charitable contributions 3,500 Miscellaneous itemized deductions [$2,000 - 2%($60,000)] 800 Total itemized deductions for regular income tax $15,300 ​ Calculate Rhonda's AMT adjustment for itemized deductions.

Abbygail,who is single,had taxable income of $115,000 for 2015.She had positive AMT adjustments of $30,000;negative AMT adjustments of $12,000;and tax preference items of $50,000. ​ a.​ Compute her alternative minimum taxable income (AMTI). a.Compute Abbygail's tentative minimum tax. b. Assume the same facts as in part

What is the relationship between the regular income tax liability and the tentative AMT?

Darin's,who is age 30,has itemized deductions in calculating 2015 taxable income as follows. Medical expenses [$15,000 - 10%($100,000)] $ 5,000 Mortgage interest on personal residence 7,000 State income taxes 4,000 Real property taxes 4,500 Personal property taxes 2,500 Casualty loss [$14,000 (after $100 floor) - (10% × $100,000)] 4,000 Charitable contributions 3,500 Gambling losses ($3,200 limited to gambling income of $1,000) 1,000 Miscellaneous itemized deductions [$2,500 - 2%($100,000)] 500 Itemized deductions $32,000 ​ a.​ Calculate Darin's itemized deductions for AMT purposes using the direct method. b.Calculate Darin's itemized deductions for AMT purposes using the indirect method.

In May 2012,Swallow,Inc. ,issues options to Karrie,a corporate officer,to purchase 100 shares of Swallow stock under an ISO plan.At the date the stock options are issued,the fair market value of the stock is $1,000 per share and the option price is $1,200 per share.The stock becomes freely transferable in 2013.Karrie exercises the options in November 2012 when the stock is selling for $1,500 per share.She sells the stock in December 2014 for $1,800 per share. ​ a.Determine the amount of the AMT adjustment for 2012. b.Determine the amount of the AMT adjustment for 2013. c.​ Determine Karrie's recognized gain for regular income tax purposes and for AMT purposes in 2014 on the sale of the stock. d.Determine the amount of the AMT adjustment for 2014.

Melinda is in the 35% marginal tax bracket.She has a net capital gain of $150,000 on the sale of land which is eligible for the alternative tax on net capital gain in calculating the regular income tax.Discuss the tax rate that applies to the $150,000 net capital gain in calculating the tentative AMT for Melinda.

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

Beige,Inc. ,has AMTI of $200,000.Calculate the amount of the AMT exemption if: a.​ Beige is a small corporation for AMT purposes. b.Beige is not a small corporation for AMT purposes.

Frederick sells land and building whose adjusted basis for regular income tax purposes is $345,000 and for AMT purposes is $380,000.The sales proceeds are $850,000.Determine the effect on: ​ a.Taxable income. b.AMTI.

In 2015,Linda incurs circulation expenses of $240,000 which she deducts in calculating taxable income. a.Calculate Linda's AMT adjustment for circulation expenses for 2015,2016,2017,and 2018. b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2015. ​

In calculating the AMT using the indirect method,do AMT adjustments and AMT tax preferences increase or decrease AMTI?

In June,Della purchases a building for $800,000 to use in her business as an office building.Della uses the depreciation method which will provide her with the greatest deduction for regular income tax purposes. ​ a.​ Calculate the AMT adjustment for depreciation in 2015 if Della purchased the building in 2015. b.Calculate the AMT preference for depreciation in 2015 if Della purchased the building in 1986.

Cindy,who is single and age 66,has no dependents and has adjusted gross income of $50,000 in 2014.Her potential itemized deductions are as follows. ​ Medical expenses (before percentage limitation) $10,000 State income taxes 2,500 Real estate taxes 4,000 Mortgage (qualified housing and residence) interest 5,500 Unreimbursed employee expenses (before percentage limitation) 2,600 ​ What is the amount of Cindy's AMT adjustment for itemized deductions for 2015?

Crimson,Inc. ,provides you with the following information: Regular corporate tax liability $ 22,250 AMT adjustments and preferences (excluding ACE adjustment) 80,000 ACE adjustment (prior positive adjustments are $17,000) (11,000) Taxable income 100,000 ​ Calculate Crimson's AMT for 2015.

Why is there a need for a second tax system called the alternative minimum tax?