Exam 12: Alternative Minimum Tax

Kerri,who had AGI of $120,000,itemized her deductions in the current year.She incurred unreimbursed employee business expenses of $8,500.Kerri must make a positive AMT adjustment of $2,400 in computing AMT.

After personal property is fully depreciated for both regular income tax purposes and AMT purposes,the positive and negative adjustments that have been made for AMT purposes will net to zero.

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

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

Business tax credits reduce the AMT and the regular income tax in the same way.

If the AMT base is greater than $182,500,the AMT rate for an individual taxpayer is the same as the AMT rate for a C corporation.

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 2014 if Della purchased the building in 2014. b.Calculate the AMT preference for depreciation in 2014 if Della purchased the building in 1986.

Lavender,Inc. ,incurs research and experimental expenditures of $210,000 in 2014.Determine the amount of the AMT adjustment for 2014 and for 2015 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.

Under what circumstances are corporations exempt from the AMT?

C corporations are subject to a positive AMT adjustment equal to 75% of the excess of ACE over AMTI before the ACE adjustment.

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

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

The net capital gain included in an individual taxpayer's AMT base is eligible for the beneficial alternative tax rate on net capital gain.This favorable alternative rate applies both in calculating the regular income tax and the AMT.

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.

Vicki owns and operates a news agency (as a sole proprietorship).During 2014,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 2014.In addition,Vicki incurred $15,000 in circulation expenditures in 2015 and again elected expense treatment.What AMT adjustments will be required in 2014 and 2015 as a result of the circulation expenditures?

Abbygail,who is single,had taxable income of $115,000 for 2014.She had positive AMT adjustments of $30,000;negative AMT adjustments of $12,000;and tax preference items of $50,000. a.Compute Abbygail's tentative minimum tax. a.Compute her alternative minimum taxable income (AMTI). b.Assume the same facts as in part

The recognized gain for regular income tax purposes and the recognized gain for AMT purposes on the sale of stock acquired under an incentive stock option (ISO)program are always the same because the adjusted basis is the same.

Discuss the tax year in which an AMT adjustment is first required for an ISO.

All of a C corporation's AMT is available for carryover as a minimum tax credit regardless of whether the adjustments and preferences originate from timing differences or AMT exclusions.