Exam 15: Alternative Minimum Tax

Prior to the effect of the tax credits,Justin's regular income tax liability is $200,000 and his tentative AMT is $195,000.Justin has the following credits: Calculate Justin's tax liability after credits.

Which of the following statements is correct?

Medical expenses are reduced by 10% of AGI to compute the amount deductible for AMT purposes and 7.5% of AGI for regular income tax purposes.

Omar acquires used 7-year personal property for $100,000 to use in his business in February 2010.Omar does not elect § 179 expensing,but does take the maximum regular cost recovery deduction.As a result,Omar will have a positive AMT adjustment in 2010 of what amount?

Caroline and Clint are married,have no dependents,and file a joint return in 2010.Use the following selected data to calculate their Federal income tax liability.

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:

Agnes is able to reduce her regular income tax liability from $40,000 to $36,000 as the result of the alternative tax on net capital gain.Agnes' tentative AMT is $50,000.

In May 2009,Egret,Inc.issues options to Andrea,a corporate officer,to purchase 200 shares of Egret stock under an ISO plan.At the date the stock options are issued,the fair market value of the stock is $900 per share and the option price is $1,200 per share.The stock becomes freely transferable in 2010.Andrea exercises the options in November 2009 when the stock is selling for $1,600 per share.She sells the stock in December 2011 for $1,800 per share.

Marvin,the vice president of Lavender,Inc. ,exercises stock options for 100 shares of stock in March 2010.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 2007 and all restrictions on the free transferability had lapsed by the exercise date.

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

Interest on a home equity loan may be deductible for AMT purposes.

Is it possible that no AMT adjustment is necessary for medical expenses in calculating AMTI even though the floor limitation is different (7.5% of AGI for regular income tax compared to 10% for AMT purposes)?

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

In calculating her taxable income,Rhonda deducts the following itemized deductions. Calculate Rhonda's AMT adjustment for itemized deductions.

Under what circumstances are corporations exempt from the AMT?

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

If a gambling loss itemized deduction is permitted for regular income tax purposes,the amount of the gambling loss itemized deduction for AMT purposes is the same.

For individual taxpayers,the AMT credit is applicable for the AMT that results from timing differences,but it is not available for the AMT that results from the adjustment for itemized deductions or exclusion preferences.

Kevin's AGI is $285,000.He contributed $150,000 in cash to a public charity.What is Kevin's charitable contribution deduction for AMT purposes?