Question 1

The AMT calculated using the indirect method will produce a different amount than the AMT calculated using the direct method.

Accepted Answer

A) True 
 B)False

Question 2

Jackson sells qualifying small business stock for $125,000 adjusted basis of $105,000) in 2018 the stock was acquired in 2012). In calculating gross income for regular income tax purposes, he excludes all of his realized gain of
$20,000. The $20,000 exclusion is a preference in calculating Jackson's AMTI.

Accepted Answer

A) True 
 B)False

Question 3

If the regular income tax deduction for medical expenses is $0, under certain circumstances the AMT deduction for medical expenses can be greater than $0.

Accepted Answer

A) True 
 B)False

Question 4

Prior to consideration of tax credits, Clarence's regular income tax liability is $200,000 and his tentative minimum tax TMT) is $180,000. Clarence holds nonrefundable business tax credits of $35,000. His tax liability is $165,000.

Accepted Answer

A) True 
 B)False

Question 5

Income from some long-term contracts can be reported using the completed contract method for regular income tax purposes, but the percentage of completion method is required for AMT purposes for all long-term contracts.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is correct?

Accepted Answer

A)  If the tentative minimum tax is $100,000 and the regular income tax liability is $120,000, AMT is $20,000. 
B)  If the tentative minimum tax is $120,000 and the regular income tax liability is $100,000, AMT is $120,000. 
C)  If the tentative minimum tax is $100,000 and the regular income tax liability is $120,000, AMT is a negative $20,000. 
D)  If the tentative minimum tax is $120,000, and the regular income tax liability is $100,000, AMT is $20,000.

Question 7

Prior to the effect of the tax credits, Justin's regular income tax liability is $200,000. and his tentative minimum tax is $195,000. Justin reports the following credits. Child tax credit $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $\quad \$ 1,000$
Adoption expenses credit  $ \quad $ $ \quad $ $ \quad $ $ \quad $ 5,000 Calculate Justin's tax liability after credits.

Accepted Answer

A)  $190,000 
B)  $194,000 
C)  $195,000 
D)  $200,000

Question 8

Brenda correctly has calculated her regular tax liability to be $32,500 and her tentative minimum tax TMT) to be $36,300. Additionally, Brenda has an adoption expense credit personal, nonrefundable credit) of $6,200. What is Brenda's total Federal income tax liability?

Accepted Answer

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

Question 9

A taxpayer who expenses circulation expenditures in the year incurred for regular income tax purposes will incur a positive AMT adjustment in the following year.

Accepted Answer

A) True 
 B)False

Question 10

The deduction for charitable contributions in calculating the regular income tax can differ from that in calculating the AMT, because the percentage limitations 20%, 30%, and 50%) may be applied to a different base amount.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would not cause an individual taxpayer's AMTI to increase in the current year?

Accepted Answer

A)  Investing in private-activity municipal bonds. 
B)  Paying real estate taxes due in January of the next year in the current year. 
C)  Amortizing circulation expenditures over three years for regular tax purposes. 
D)  Exercising incentive stock options.

Question 12

The AMT adjustment for mining exploration and development costs can be avoided if the taxpayer elects to deduct the expenditures in the year incurred for regular income tax purposes, rather than writing off the expenditures over a 10-year period for regular income tax purposes.

Accepted Answer

A) True 
 B)False

Question 13

Negative AMT adjustments for the current year caused by timing differences are offset by the positive AMT adjustments in prior tax years also caused by timing differences.

Accepted Answer

A) True 
 B)False

Question 14

The AMT adjustment for research and experimental expenditures can be avoided if the taxpayer capitalizes the expenditures and amortizes them over a 10-year period for regular tax purposes.

Accepted Answer

A) True 
 B)False

Question 15

The phaseout of the AMT exemption amount for a taxpayer filing as a head of household both begins and ends at a higher income level than it does for a single taxpayer.

Accepted Answer

A) True 
 B)False

Question 16

The standard deduction is allowed for regular income tax purposes, but is disallowed for AMT purposes. This results in a positive AMT adjustment.

Accepted Answer

A) True 
 B)False

Question 17

Since most tax preferences are merely timing differences, they eventually reverse and net to zero.

Accepted Answer

A) True 
 B)False

Question 18

Keosha acquires used 10-year personal property to use in her business in 2018 and uses MACRS depreciation for regular income tax purposes. As a result, Keosha will incur a positive AMT adjustment in 2018, because AMT depreciation is slower.

Accepted Answer

A) True 
 B)False

Question 19

AMT adjustments can be positive or negative, whereas AMT preferences always are positive.

Accepted Answer

A) True 
 B)False

Question 20

Interest income on private activity bonds issued in 2015, reduced by expenses incurred in carrying the bonds, is a preference item that is included in computing AMTI.

Accepted Answer

A) True 
 B)False

Exam 12: Alternative Minimum Tax

The AMT calculated using the indirect method will produce a different amount than the AMT calculated using the direct method.

If the regular income tax deduction for medical expenses is $0, under certain circumstances the AMT deduction for medical expenses can be greater than $0.

Prior to consideration of tax credits, Clarence's regular income tax liability is $200,000 and his tentative minimum tax TMT) is $180,000. Clarence holds nonrefundable business tax credits of $35,000. His tax liability is $165,000.

Income from some long-term contracts can be reported using the completed contract method for regular income tax purposes, but the percentage of completion method is required for AMT purposes for all long-term contracts.

Which of the following statements is correct?

Brenda correctly has calculated her regular tax liability to be $32,500 and her tentative minimum tax TMT) to be $36,300. Additionally, Brenda has an adoption expense credit personal, nonrefundable credit) of $6,200. What is Brenda's total Federal income tax liability?

A taxpayer who expenses circulation expenditures in the year incurred for regular income tax purposes will incur a positive AMT adjustment in the following year.

The deduction for charitable contributions in calculating the regular income tax can differ from that in calculating the AMT, because the percentage limitations 20%, 30%, and 50%) may be applied to a different base amount.

Which of the following would not cause an individual taxpayer's AMTI to increase in the current year?

The AMT adjustment for mining exploration and development costs can be avoided if the taxpayer elects to deduct the expenditures in the year incurred for regular income tax purposes, rather than writing off the expenditures over a 10-year period for regular income tax purposes.

Negative AMT adjustments for the current year caused by timing differences are offset by the positive AMT adjustments in prior tax years also caused by timing differences.

The AMT adjustment for research and experimental expenditures can be avoided if the taxpayer capitalizes the expenditures and amortizes them over a 10-year period for regular tax purposes.

The phaseout of the AMT exemption amount for a taxpayer filing as a head of household both begins and ends at a higher income level than it does for a single taxpayer.

The standard deduction is allowed for regular income tax purposes, but is disallowed for AMT purposes. This results in a positive AMT adjustment.

Since most tax preferences are merely timing differences, they eventually reverse and net to zero.

Keosha acquires used 10-year personal property to use in her business in 2018 and uses MACRS depreciation for regular income tax purposes. As a result, Keosha will incur a positive AMT adjustment in 2018, because AMT depreciation is slower.

AMT adjustments can be positive or negative, whereas AMT preferences always are positive.

Interest income on private activity bonds issued in 2015, reduced by expenses incurred in carrying the bonds, is a preference item that is included in computing AMTI.