Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

After personal property is fully depreciated for both regular income tax purposes and AMT purposes, no AMT adjustment will be required as a result of the sale of the property.

Accepted Answer

A) True 
 B)False

Question 3

In 2018, Glenn recorded a $108,000 loss on a passive activity. None of the loss is attributable to AMT adjustments or preferences. She has no other passive activities. Which of the following statements is correct?

Accepted Answer

A)  In 2018, Glenn can deduct $108,000 for regular income tax purposes and for AMT purposes. 
B)  Glenn reports a $108,000 tax preference in 2018 as a result of the passive activity. 
C)  For regular income tax purposes, none of the passive activity loss is allowed in 2018. 
D)  In 2018, Glenn reports a positive adjustment of $25,000 as a result of the passive activity loss.

Question 4

Benita expensed mining exploration and development costs of $500,000 incurred in the current tax year. She will be required to make negative AMT adjustments for each of the next ten years and a positive AMT adjustment in the current tax year.

Accepted Answer

A) True 
 B)False

Question 5

Celia and Christian, who are married filing jointly, have one dependent and do not itemize deductions. They report taxable income of $492,000 and tax preferences of $53,000 in 2018. What is their AMT base for 2018?

Accepted Answer

A)  $0. 
B)  $492,000. 
C)  $459,600. 
D)  $569,000.

Question 6

Nell records a personal casualty loss deduction of $14,500 for regular income tax purposes The loss was the result of a Federally-declared disaster.). The loss was computed as $26,600, but it was reduced by $100 and by $12,000 10% × $120,000 AGI). For AMT purposes, the casualty loss deduction also is $14,500.

Accepted Answer

A) True 
 B)False

Question 7

Cher sold undeveloped land that originally cost $150,000 for $225,000. There is a positive AMT adjustment of
$75,000 associated with the sale of the land.

Accepted Answer

A) True 
 B)False

Question 8

Interest on a home equity loan cannot be deducted for AMT purposes.

Accepted Answer

A) True 
 B)False

Question 9

In the current tax year, Ben exercised an incentive stock option ISO), acquiring stock with a fair market value of
$190,000 for $170,000. As a result, his AMT basis for the stock is $170,000, his regular income tax basis for the stock is $170,000, and his AMT adjustment is $0 $170,000 - $170,000).

Accepted Answer

A) True 
 B)False

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

Because passive losses are not deductible in computing either taxable income or AMTI, no AMT adjustment for passive losses is required.

Accepted Answer

A) True 
 B)False

Question 12

Evan is a contractor who constructs both commercial and residential buildings. Even though some of the contracts could qualify for the use of the completed contract method, Evan decides to use the percentage of the completion method for all of his contracts. This increases Evan's AMT adjustment associated with long-term contracts for the current year.

Accepted Answer

A) True 
 B)False

Question 13

Tamara operates a natural gas sole proprietorship that incurred $68,000 of intangible drilling costs IDC) in the current year. Her sole proprietorship's net natural gas income for the year is $72,000. What is the sole proprietorship's current year IDC preference?

Accepted Answer

A)  $6,800. 
B)  $10,800. 
C)  $14,400. 
D)  $46,800.

Question 14

Madge's tentative minimum tax TMT) is $112,000. Her regular income tax liability is $99,000. Madge's AMT is
$13,000.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Wallace owns a construction company that builds both commercial and residential buildings. He contracts to build a residential building for $800,000, and 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 gross income on the contract. Under the percentage of completion method, the income recognized under the contract would have been
$60,000. Wallace's AMT effect is:

Accepted Answer

A)  $0. 
B)  $60,000 negative adjustment. 
C)  $60,000 positive adjustment. 
D)  $800,000 positive adjustment.

Question 17

In 2018, Brenda has calculated her regular tax liability to be $32,500 and her tentative minimum tax TMT) to be $36,300. Additionally, Brenda holds an alternative minimum tax credit of $6,200 from 2014.
What is Brenda's total 2018 Federal income tax liability?

Accepted Answer

A)  $26,300. 
B)  $30,100. 
C)  $32,500. 
D)  $36,300.

Question 18

On February 1, 2018, Omar acquires used 7-year personal property for $100,000 for use in his business. Omar does not elect § 179 expensing, but he does take the maximum regular cost recovery deduction. As a result, Omar incurs a positive AMT adjustment in 2018 of what amount?

Accepted Answer

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

Question 19

For regular income tax purposes, Yolanda, who is single, is in the 32% tax bracket. Her AMT base is $420,000. Her tentative AMT is:

Accepted Answer

A)  $49,686. 
B)  $109,200. 
C)  $113,778. 
D)  $117,600. 
E)  None of the above.

Question 20

In deciding whether 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

Exam 12: Alternative Minimum Tax

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

After personal property is fully depreciated for both regular income tax purposes and AMT purposes, no AMT adjustment will be required as a result of the sale of the property.

In 2018, Glenn recorded a $108,000 loss on a passive activity. None of the loss is attributable to AMT adjustments or preferences. She has no other passive activities. Which of the following statements is correct?

Benita expensed mining exploration and development costs of $500,000 incurred in the current tax year. She will be required to make negative AMT adjustments for each of the next ten years and a positive AMT adjustment in the current tax year.

Celia and Christian, who are married filing jointly, have one dependent and do not itemize deductions. They report taxable income of $492,000 and tax preferences of $53,000 in 2018. What is their AMT base for 2018?

Cher sold undeveloped land that originally cost $150,000 for $225,000. There is a positive AMT adjustment of $75,000 associated with the sale of the land.

Interest on a home equity loan cannot be deducted for AMT purposes.

In the current tax year, Ben exercised an incentive stock option ISO), acquiring stock with a fair market value of $190,000 for $170,000. As a result, his AMT basis for the stock is $170,000, his regular income tax basis for the stock is $170,000, and his AMT adjustment is $0 $170,000 - $170,000).

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.

Because passive losses are not deductible in computing either taxable income or AMTI, no AMT adjustment for passive losses is required.

Tamara operates a natural gas sole proprietorship that incurred $68,000 of intangible drilling costs IDC) in the current year. Her sole proprietorship's net natural gas income for the year is $72,000. What is the sole proprietorship's current year IDC preference?

Madge's tentative minimum tax TMT) is $112,000. Her regular income tax liability is $99,000. Madge's AMT is $13,000.

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

In 2018, Brenda has calculated her regular tax liability to be $32,500 and her tentative minimum tax TMT) to be $36,300. Additionally, Brenda holds an alternative minimum tax credit of $6,200 from 2014. What is Brenda's total 2018 Federal income tax liability?

On February 1, 2018, Omar acquires used 7-year personal property for $100,000 for use in his business. Omar does not elect § 179 expensing, but he does take the maximum regular cost recovery deduction. As a result, Omar incurs a positive AMT adjustment in 2018 of what amount?

For regular income tax purposes, Yolanda, who is single, is in the 32% tax bracket. Her AMT base is $420,000. Her tentative AMT is:

In deciding whether 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.