Exam 15: Alternative Minimum Tax

On January 3, 1998, Parrot Corporation acquired an office building for $300,000 and computed depreciation under ADS (Alternative Depreciation System) for regular income tax purposes. The ADS rate for the first year is 2.396% and for the fifteenth year is 2.50% (MACRS rates would have been 2.461% and 2.564% respectively). What is Parrot's AMT adjustment (or preference) for depreciation with respect to the office building for 1998 and for 2012?

Can AMT adjustments and preferences be both positive and negative?

Tammy expensed mining exploration and development costs of $100,000 incurred in 2012.She will be required to make negative AMT adjustments for each of the next nine years and a positive AMT adjustment in the current tax year.

What itemized deductions are allowed for both regular income tax purposes and for AMT purposes?

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?

Moore incurred circulation expenditures of $300,000 in 2012 and deducted that amount for regular income tax purposes.Moore has a $100,000 negative AMT adjustment for 2013, for 2014, and for 2015.

If Abby's alternative minimum taxable income exceeds her regular taxable income, she will have an alternative minimum tax.

Income from some long-term contracts can be reported using the completed contract method for regular income tax purposes, but the percentage of completion method is required for AMT purposes for all long-term contracts.

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 tax preference for excess depletion?

A tax preference can increase or decrease alternative minimum taxable income while an adjustment can only increase alternative minimum taxable income.

Cindy, who is single and has no dependents, has adjusted gross income of $50,000 in 2012.Her potential itemized deductions are as follows: What is the amount of Cindy's AMT adjustment for itemized deductions for 2012?

The amount of the deduction for medical expenses under the regular income tax may be different than for AMT purposes.

The AMT can be calculated using either the direct or the indirect approaches.Both the tax law and the tax forms use the direct approach.

Bianca and Barney have the following for 2012:

For regular income tax purposes, Yolanda, who is single, is in the 35% tax bracket.Her AMT base is $220,000.Her tentative AMT is:

Sand Corporation, a calendar year taxpayer, has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE)] of $750,000 for 2012.If Sand's (ACE) is $975,000, its tentative minimum tax for 2012 is:

Tad and Audria, who are married filing a joint return, have AMTI of $256,000 for 2012. Calculate their AMT exemption.

Use the following data to calculate Diane's AMTI.

Are the AMT rates for the individual taxpayer the same as those for a corporate taxpayer?

Because passive losses are not deductible in computing either taxable income or AMTI, no adjustment for passive losses is required for AMT purposes.