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

Terence and Alfred each invested $10,000 cash in T&A General Partnership and each received a 50% interest in the partnership. The partnership borrowed $100,000 in full recourse debt. a. Assume that the $100,000 was borrowed from a bank. What are the amounts Terence and Alfred have at-risk with respect to their partnership interests? b. Assume that the $100,000 was borrowed from Alfred. What are the amounts Terence and Alfred have at-risk with respect to their partnership interests?

Denise's AGI is $145,000 before considering her single rental property. During the year, Denise had a rental loss of $13,000. What is Denise's AGI after considering the rental loss?

The term "active participation" is used to determine:

Sarah is single with no dependents. During 2015, Sarah has $86,000 of taxable income. She has $14,000 of positive AMT adjustments and $24,000 of tax preferences. Sarah does not itemize her deductions but takes the standard deduction. Calculate Sarah's AMTI.

Stuart owns a 20% interest in a partnership (not involved in real estate) in which his at-risk amount was $18,000 at the beginning of the year. The partnership produces a $50,000 loss for the year. What is Stuart's at-risk amount at the end of the year?

Rene owns four small businesses. Rene spends the following number of hours this year working in those businesses: Business A, 105 hours; Business B, 130 hours; Business C, 120 hours; Business D, 99 hours. Which of the following statements is correct?

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

After computing all tax preferences and AMT adjustments, Peter has AMTI of $210,000 in 2015. If Peter is single, what exemption amount can he claim for AMT in 2015?

When determining whether a limited partnership loss is deductible, a taxpayer must first:

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 general rule concerning passive losses is that passive activity losses can only be deducted to the extent of passive and portfolio income.

Joshua purchased business furniture and fixtures (7-year property) for $40,000 in May 2012. On July 15, 2015, Joshua sold the furniture and fixtures for $30,000. During his years of ownership, he had taken $27,504 of depreciation for regular tax purposes. AMT depreciation for that period was $17,276. What is the 2015 AMT adjustment required as a result of the sale of the assets?

Which of the following increases the taxpayer's at-risk amount?

Beverly works for a large publicly traded company and regularly receives incentive stock options as bonuses. In the current year, Beverly exercises options to purchase 1,000 shares at $48 per share when the market value is $72 per share. What is Beverly's AMT adjustment from the exercise of the options?

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

For AMT purposes, a taxpayer must use which method to report proceeds from long-term contracts?

Ferris owns an interest in, but does not materially participate in, an activity. He has $30,000 at-risk. The business produced a loss in the current year and Ferris's share of the loss is $45,000. Assuming Ferris has no passive income, how much of the $45,000 loss will be deductible by Ferris?

Jon is in the car rental business. Most of his customers rent cars on a daily basis. Jon's car rental business is considered a passive activity since rental activities are always treated as passive activities.

If a loss is disallowed under passive loss rules, the loss is:

Itemized deductions are allowed in their entirety for AMT purposes.