Exam 12: Alternative Minimum Tax

Cindy, who is single and age 48, has no dependents and has adjusted gross income of $50,000 in 2017. Her potential itemized deductions are as follows. ​ ​ What are Cindy's AMT adjustments for itemized deductions for 2017?

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

If the regular income tax deduction for medical expenses is $0, under certain circumstances the AMT deduction for medical expenses can be greater than $0.

Use the following data to calculate Jolene's AMTI in 2017. Jolene itemizes deductions.

The corporate AMT does not apply to "small" C corporations.

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.

Arlene, who is single, reports taxable income for 2017 of $112,000. Calculate her alternative minimum tax, if any, given the following additional information. ​

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

The AMT adjustment for mining exploration and development costs can be avoided if the taxpayer elects to deduct the expenditures in the year incurred for regular income tax purposes, rather than writing off the expenditures over a 10-year period for regular income tax purposes.

A taxpayer has a passive activity loss for the current tax year for regular income tax purposes and for AMT purposes. Is it possible that the passive activity losses will be the same amount?

For individual taxpayers, the AMT credit is applicable for the AMT that results from timing differences, but it is not available for the AMT that results from the adjustment for itemized deductions or exclusion preferences.

A taxpayer who expenses circulation expenditures in the year incurred for regular income tax purposes will have a positive AMT adjustment in the following year.

Paul incurred circulation expenditures of $180,000 in 2017 and deducted that amount for regular income tax purposes. Paul has a $60,000 negative AMT adjustment for each of 2018, 2019, and for 2020.

The deduction for personal and dependency exemptions is allowed for regular income tax purposes, but is disallowed for AMT purposes. This results in a positive AMT adjustment.

Akeem, who does not itemize, incurred a net operating loss (NOL) of $50,000 in 2016. His deductions in 2016 included AMT tax preference items of $20,000, and he had no AMT adjustments. Assuming the NOL is not carried back, what is Akeem's ATNOLD carryover to 2017?

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

Vicki owns and operates a news agency (as a sole proprietorship). During 2017, 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 2017. In addition, Vicki incurred $15,000 in circulation expenditures in 2018 and again elected expense treatment. What AMT adjustments will be required in 2017 and 2018 as a result of the circulation expenditures?

Andrea, who is single, is entitled to a personal exemption deduction in calculating her 2017 taxable income. She has no dependency exemptions. What is the amount of the AMT adjustment in calculating AMTI?

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.

Cher sold undeveloped land that originally cost $150,000 for $225,000. There is a positive AMT adjustment of $75,000 associated with the sale of the land.