Exam 13: At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

After computing all tax preferences and AMT adjustments,Adam and his wife Cindy have AMTI of $290,000.If Adam and Cindy file a joint tax return,what exemption amount can they claim for AMT for 2016?

Spencer has an ownership interest in three passive activities.In the current tax year,the activities had the following income and losses: How much in passive losses can Spencer deduct?

Catherine purchased furniture and fixtures 7-year property)for her shop for $80,000 in May.What AMT depreciation adjustment is required for the year?

The term "passive activity" includes any activity for the production of income in which the taxpayer does not materially participate.

The AMT tax rate for individuals is 20%.

If a limited partner materially participates in the trade or business of a limited partnership,the passive loss rules still apply.

Itemized deductions are allowed in their entirety for AMT purposes.

The at-risk amount is increased each tax year by:

In 2014,Mary invested $200,000 in a business that is not a passive activity.During 2015,her share of the business loss is $140,000.In 2016,her share of the business loss is $100,000.How much can Mary deduct in 2015 and 2016?

In 2016,Nigel contributes cash of $10,000 in exchange for a 20% interest in the NDP Partnership.The partnership is not a passive activity.For 2016,the partnership had an ordinary loss of $80,000,interest income of $2,000,dividends of $5,000,and capital gains of $4,000.How much of the current year loss is deductible by Nigel and what is Nigel's at-risk amount on December 31,2016?

Alice is an attorney and earned $175,000 from her practice in the current year.Alice also owns three passive activities.The activities had the following income and losses: What is Alice's adjusted gross income for the current year?

The Tara Partnership not involved in real estate)generated income of $75,000 during the year.Since the partnership is involved in an activity that is subject to the at-risk rules,all of Tara's partners must file Form 6198 with their individual income tax returns.

Jacob is single with no dependents.During 2016,Jacob has $110,000 of taxable income.He has $38,000 of positive AMT adjustments and $22,000 of tax preferences.Jacob does not itemize his deductions but takes the standard deduction.Calculate Jacob's AMTI.

In 2016,Ethan contributes cash of $50,000 and property with a fair market value of $100,000 and basis of $20,000 in exchange for a 20% interest in the EFP Partnership.The partnership is not a passive activity.For 2016,his share of partnership items were an ordinary loss of $80,000,interest income of $2,000,dividends of $5,000,and capital gains of $4,000.How much of the current year loss is deductible by Ethan and what is Ethan's at-risk amount on December 31,2016?

Libby owns and operates Mountain View Inn,a bed and breakfast.Libby's inn is not considered a passive activity.

Elijah owns an apartment complex that he actively manages.Elijah paid $300,000 cash for the apartment complex three years ago.During 2016,the rental activity generated a loss of $30,000.How much of the loss can Elijah deduct in 2016 in both of the following independent cases? a.Elijah has $80,000 of AGI salary)before considering the loss generated by the apartment building. b.Elijah has $120,000 of AGI salary)before considering the loss generated by the apartment building.

Tax preference items can be either positive or negative.

Identify factors that increase or decrease the at-risk amount.

"Active participation" is a much more difficult standard to meet than "material participation."

Antonio reported the following itemized deductions on his 2016 tax return.His AGI for 2016 was $95,000.The mortgage interest is all qualified mortgage interest to purchase his personal residence.For AMT,compute his total adjustment for itemized deductions.