Question 1

The exercise of an incentive stock option (ISO) increases both the AMTI and regular taxable income in the year of exercise.

Accepted Answer

A) True 
 B)False

Question 2

In deciding to enact the alternative minimum tax, Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

Accepted Answer

A) True 
 B)False

Question 3

Wallace owns a construction company that builds both commercial and residential buildings. He contracts to build a residential building for $800,000 for which he is eligible to use the completed contract method of accounting. In the current year for regular income tax purposes, Wallace does not recognize any income on the contract. Under the percentage of complete method, the income recognized under the contract would have been $60,000. Wallace's AMT adjustment is:

Accepted Answer

A) $0. 
B) $60,000 negative adjustment. 
C) $60,000 positive adjustment. 
D) $800,000 positive adjustment. 
E) None of the above. 
A) $0. 
B) $60,000 negative adjustment. 
C) $60,000 positive adjustment. 
D) $800,000 positive adjustment. 
E) None of the above.

Question 4

Meg, who is single and age 36, provides you with the following information from her financial records.   Calculate her AMT exemption for 2012.

Accepted Answer

A) $0. 
B) $23,450. 
C) $14,075. 
D) $48,450. 
E) None of the above. 
A) $0. 
B) $23,450. 
C) $14,075. 
D) $48,450. 
E) None of the above.

Question 5

Omar acquires used 7-year personal property for $100,000 to use in his business in February 2012.Omar does not elect § 179 expensing, but does take the maximum regular cost recovery deduction.He elects not to take additional first-year depreciation.As a result, Omar will have a positive AMT adjustment in 2012 of what amount?

Accepted Answer

A) $0. 
B) $3,580. 
C) $10,710. 
D) $14,290. 
E) None of the above. 
A) $0. 
B) $3,580. 
C) $10,710. 
D) $14,290. 
E) None of the above.

Question 6

Joel placed real property in service in 2012 that cost $900,000 and used MACRS for regular income tax purposes.He is required to make a positive adjustment for AMT purposes in 2012 for the excess of depreciation calculated for regular income tax purposes over the depreciation calculated for AMT purposes.

Accepted Answer

A) True 
 B)False

Question 7

Kay had percentage depletion of $119,000 for the current year for regular income tax purposes.Cost depletion was $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 tax preference in computing AMTI.

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

Factors that can cause the adjusted basis for AMT purposes to be different from the adjusted basis for regular income tax purposes include the following:

Accepted Answer

A) A different amount of depreciation (cost recovery) has been deducted for AMT purposes and regular income tax purposes. 
B) The spread on an incentive stock option (ISO) is recognized for AMT purposes, but is not recognized for regular income tax purposes. 
C) A different amount has been deducted for circulation expenditures for AMT purposes and for regular income tax purposes. 
D) Only a.and b. 
E) a., b., and c. 
A) A different amount of depreciation (cost recovery) has been deducted for AMT purposes and regular income tax purposes. 
B) The spread on an incentive stock option (ISO) is recognized for AMT purposes, but is not recognized for regular income tax purposes. 
C) A different amount has been deducted for circulation expenditures for AMT purposes and for regular income tax purposes. 
D) Only a.and b. 
E) a., b., and c.

Question 10

Which of the following statements is incorrect?

Accepted Answer

A) If the tentative minimum tax exceeds the regular income tax liability, the AMT is $0. 
B) The exemption amount increases as AMTI increases. 
C) The AMT tax rate for an individual taxpayer can be as high as 26%. 
D) Only a.and b.are incorrect. 
E) a., b., and c.are incorrect. 
A) If the tentative minimum tax exceeds the regular income tax liability, the AMT is $0. 
B) The exemption amount increases as AMTI increases. 
C) The AMT tax rate for an individual taxpayer can be as high as 26%. 
D) Only a.and b.are incorrect. 
E) a., b., and c.are incorrect.

Question 11

In September, Dorothy purchases a building for $900,000 to use in her business as a warehouse.Dorothy uses the depreciation method which will provide her with the greatest deduction for regular income tax purposes.

Accepted Answer

The answer of In September, Dorothy purchases a building for...

Question 12

Mauve, Inc., has the following for 2011, 2012, and 2013 and no prior ACE adjustments.

Accepted Answer

A)  $0 $1,500 ($1,500) 
B)  ($2,000) $2,000 ($3,000) 
C)  $2,000 ($2,000) $3,000 
D)  ($1,500) $1,500 $2,250 
E)  $1,500 ($1,500) ($2,250) 
A)  $0 $1,500 ($1,500) 
B)  ($2,000) $2,000 ($3,000) 
C)  $2,000 ($2,000) $3,000 
D)  ($1,500) $1,500 $2,250 
E)  $1,500 ($1,500) ($2,250)

Question 13

Altrice incurs circulation expenditures of $180,000 in 2012.No additional circulation expenditures are incurred in 2013 or 2014.The cumulative adjustment for circulation expenditures for 2012, 2013, and 2014 is $180,000.

Accepted Answer

A) True 
 B)False

Question 14

How can the positive AMT adjustment for research and experimental expenditures be avoided?

Accepted Answer

For regular income tax purposes, researc

Question 15

Which of the following can produce an AMT preference rather than an AMT adjustment?

Accepted Answer

A) Standard deduction. 
B) Research and experimental expenditures. 
C) Percentage depletion. 
D) Incentive stock options (ISOs). 
E) None of the above. 
A) Standard deduction. 
B) Research and experimental expenditures. 
C) Percentage depletion. 
D) Incentive stock options (ISOs). 
E) None of the above.

Question 16

What effect do deductible gambling losses for regular income tax purposes have in calculating AMTI?

Accepted Answer

The amount allowable in calculating the

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which of the following normally produces positive AMT adjustments?

Accepted Answer

A) Real property taxes deduction. 
B) Standard deduction. 
C) Charitable contribution deduction. 
D) Only a.and b.are correct. 
E) a., b., and c.are correct. 
A) Real property taxes deduction. 
B) Standard deduction. 
C) Charitable contribution deduction. 
D) Only a.and b.are correct. 
E) a., b., and c.are correct.

Question 19

Robin, who is a head of household and age 42, provides you with the following information from his financial records for 2012.   Calculate his AMT for 2012.

Accepted Answer

A) $14,533. 
B) $17,825. 
C) $42,986. 
D) $62,300. 
E) None of the above. 
A) $14,533. 
B) $17,825. 
C) $42,986. 
D) $62,300. 
E) None of the above.

Question 20

When qualified residence interest exceeds qualified housing interest, the positive adjustment required in calculating AMT is a timing adjustment.That is, in the future, there will be an offsetting negative adjustment.Comment on the validity of this statement.

Accepted Answer

This AMT adjustment

Exam 15: Alternative Minimum Tax

The exercise of an incentive stock option (ISO) increases both the AMTI and regular taxable income in the year of exercise.

In deciding to enact the alternative minimum tax, Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

Meg, who is single and age 36, provides you with the following information from her financial records. Calculate her AMT exemption for 2012.

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.

Factors that can cause the adjusted basis for AMT purposes to be different from the adjusted basis for regular income tax purposes include the following:

Which of the following statements is incorrect?

In September, Dorothy purchases a building for $900,000 to use in her business as a warehouse.Dorothy uses the depreciation method which will provide her with the greatest deduction for regular income tax purposes.

Mauve, Inc., has the following for 2011, 2012, and 2013 and no prior ACE adjustments.

Altrice incurs circulation expenditures of $180,000 in 2012.No additional circulation expenditures are incurred in 2013 or 2014.The cumulative adjustment for circulation expenditures for 2012, 2013, and 2014 is $180,000.

How can the positive AMT adjustment for research and experimental expenditures be avoided?

Which of the following can produce an AMT preference rather than an AMT adjustment?

What effect do deductible gambling losses for regular income tax purposes have in calculating AMTI?

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

Which of the following normally produces positive AMT adjustments?

Robin, who is a head of household and age 42, provides you with the following information from his financial records for 2012. Calculate his AMT for 2012.

When qualified residence interest exceeds qualified housing interest, the positive adjustment required in calculating AMT is a timing adjustment.That is, in the future, there will be an offsetting negative adjustment.Comment on the validity of this statement.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

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