Exam 12: Alternative Minimum Tax

Marvin, the vice president of Lavender, Inc., exercises stock options for 100 shares of stock in March 2017. The stock options are incentive stock options (ISOs). Their exercise price is $20 and the fair market value on the date of exercise is $28. The options were granted in March 2013 and all restrictions on the free transferability had lapsed by the exercise date.

AGI is used as the base for application of percentage limitations (i.e., 20%, 30%, 50%) that apply to the charitable contribution deduction for regular income tax purposes. Modified AGI is used as the base for application of percentage limitations that apply to the charitable contribution deduction for AMT purposes.

Certain adjustments apply in calculating the corporate AMT that do not apply in calculating the noncorporate AMT and certain adjustments apply in calculating the noncorporate AMT that do not apply in calculating the corporate AMT.

Lilly is single and reports zero taxable income for 2017. She incurs positive AMT timing adjustments of $600,000 and AMT exclusions of $200,000. ​ a.Calculate Lilly's tentative minimum tax (TMT). b.Calculate Lilly's AMT credit carryover to 2018.

Prior to the effect of tax credits, Eunice's regular income tax liability is $325,000 and her tentative minimum tax is $312,000. Eunice has general business credits available of $20,000. Calculate Eunice's tax liability after tax credits.

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year. Cost depletion is $19,000. The property qualifies for a 15% depletion rate. Gross income from the property was $200,000, and net income before the percentage depletion deduction was $50,000. What is Eula's AMT preference for excess depletion, if she maximized her regular-tax depletion deduction?

Jackson sells qualifying small business stock for $125,000 (adjusted basis of $105,000) in 2017 (the stock was acquired in 2011). In calculating gross income for regular income tax purposes, he excludes all of his realized gain of $20,000. The $20,000 exclusion is a preference in calculating Jackson's AMTI.

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

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 ten years and a positive AMT adjustment in the current tax year.

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?

​In 2017, Liam's filing status is married filing separately. For regular tax purposes, he claims a dependency exemption for himself and three personal exemptions ($16,200 in total). Liam does not itemize deductions; his regular taxable income is $56,000. ​ ​ What is Liam's 2017 AMT base?

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?

Melinda is in the 35% marginal regular tax bracket. She reports a net capital gain of $150,000 on the sale of land which is eligible for the lower 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 minimum tax (TMT) for Melinda.

Tamara operates a natural gas sole proprietorship that incurred $68,000 of intangible drilling costs (IDC) in the current year. Her sole proprietorship's net natural gas income for the year is $72,000. ​ What is the sole proprietorship's current year IDC preference? ​

Abigail, who is single, reported taxable income of $115,000 for 2017. She incurred positive AMT adjustments of $30,000, negative AMT adjustments of $12,000, and tax preference items of $50,000. Abigail itemizes deductions. ​ a.Compute Abigail's AMTI. a. Compute Abigail's tentative minimum tax (TMT). b.Assume the same facts as in part

If a gambling loss itemized deduction is permitted for regular income tax purposes, no AMT adjustment results.

​In 2017, Zachary incurs no AMT adjustments, and his only AMT preference (which is also his only itemized deduction) is $42,000 of state and local and real property taxes. ​ If Zachary were a single taxpayer who itemized deductions and had taxable income of $95,000, his regular tax liability would be $19,582 and his AMT liability would be $22,555. ​ Assume instead that Zachary is a married taxpayer filing jointly in 2017. The couple's taxable income amount is changed only by the additional personal exemption. In comparison to the tax liability amounts presented above, the couple's regular and AMT tax liabilities would be:

Nell records a personal casualty loss deduction of $14,500 for regular income tax purposes. The loss was computed as $26,600, but it was reduced by $100 and by $12,000 (10% × $120,000 AGI). For AMT purposes, the casualty loss deduction also is $14,500.

The AMT adjustment for research and experimental expenditures can be avoided if the taxpayer capitalizes the expenditures and amortizes them over a 10-year period for regular tax purposes.

Caroline and Clint are married, have no dependents, and file a joint return in 2017. Use the following information to calculate their Federal income tax liability. ​