Question 1

Under what circumstances are C corporations exempt from the AMT?

Accepted Answer

The answer of Under what circumstances are C corporations exempt...

Question 2

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes,there will be an AMT adjustment.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

AGI is used as the base for application of percentage limitations (i.e. ,20%,30%,50%)that apply to the charitable contribution deduction for regular income tax purposes.Modified AGI is used as the base for application of percentage limitations that apply to the charitable contribution deduction for AMT purposes.

Accepted Answer

A) True 
 B)False

Question 5

Bianca and David report the following for 2016.
Regular income tax before credits
$32,000
Tentative minimum tax before credits
45,000
​
a.Calculate Bianca and David's AMT if they qualify for the adoption expense credit of $11,000.
b.Calculate Bianca and David's AMT if they qualify for the adoption expense credit of $13,190.

Accepted Answer

The answer of Bianca and David report the following for...

Question 6

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 7

Prior to the effect of tax credits,Clarence's regular income tax liability is $200,000 and his tentative AMT 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 8

Paul incurred circulation expenditures of $180,000 in 2016 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for each of 2017,2018,and for 2019.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Certain adjustments apply in calculating the corporate AMT that do not apply in calculating the noncorporate AMT and certain adjustments apply in calculating the noncorporate AMT that do not apply in calculating the corporate AMT.

Accepted Answer

A) True 
 B)False

Question 11

Keosha acquires 10-year personal property to use in her business in 2016 and takes the maximum cost recovery deduction for regular income tax purposes.As a result of this,Keosha will incur a positive AMT adjustment in 2016.

Accepted Answer

A) True 
 B)False

Question 12

Robin,who is a head of household and age 42,provides you with the following information from his financial records for 2015.Robert itemizes deductions.
Regular income tax liability
$ 41,527
AMT positive adjustments
30,000
AMT preferences
20,000
Taxable income
181,000
​
Calculate his AMT for 2016.

Accepted Answer

A) $6,633. 
B) $13,544. 
C) $41,527. 
D) $55,071.

Question 13

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 14

Sage,Inc. ,has the following gross receipts and taxable income,since its incorporation in 2010.
Gross receipts
Taxable income
2010
$4,600,000
$120,000
2011
4,300,000
190,000
2012
7,200,000
162,000
2013
9,000,000
180,000
2014
6,200,000
150,000
2015
6,500,000
160,000
2016
6,800,000
162,000
Is Sage,Inc. ,subject to the AMT in 2016?

Accepted Answer

The answer of Sage,Inc. ,has the following gross receipts and...

Question 15

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 16

Wallace owns a construction company that builds both commercial and residential buildings.He contracts to build a residential building for $800,000 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 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 deciding 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

Question 18

Is it possible that no AMT adjustment is necessary for medical expenses in calculating AMTI for a taxpayer who is at least age 65 even though the floor limitation is different (7.5% of AGI for regular income tax compared to 10% for AMT purposes)?

Accepted Answer

The answer of Is it possible that no AMT adjustment...

Question 19

In June,Della purchases a building for $800,000 to use in her business as an office building.Della uses the depreciation method which will provide her with the greatest deduction for regular income tax purposes.
​
a.Calculate the AMT adjustment for depreciation in 2016 if Della purchased the building in 2016.
b.Calculate the AMT preference for depreciation in 2016 if Della purchased the building in 1986.

Accepted Answer

The answer of In June,Della purchases a building for $800,000...

Question 20

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

Exam 12: Alternative Minimum Tax

Under what circumstances are C corporations exempt from the AMT?

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes,there will be an AMT adjustment.

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

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

Prior to the effect of tax credits,Clarence's regular income tax liability is $200,000 and his tentative AMT is $180,000.Clarence holds nonrefundable business tax credits of $35,000.His tax liability is $165,000.

Paul incurred circulation expenditures of $180,000 in 2016 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for each of 2017,2018,and for 2019.

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

Certain adjustments apply in calculating the corporate AMT that do not apply in calculating the noncorporate AMT and certain adjustments apply in calculating the noncorporate AMT that do not apply in calculating the corporate AMT.

Keosha acquires 10-year personal property to use in her business in 2016 and takes the maximum cost recovery deduction for regular income tax purposes.As a result of this,Keosha will incur a positive AMT adjustment in 2016.

Robin,who is a head of household and age 42,provides you with the following information from his financial records for 2015.Robert itemizes deductions. Regular income tax liability $ 41,527 AMT positive adjustments 30,000 AMT preferences 20,000 Taxable income 181,000 Calculate his AMT for 2016.

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.

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.

In deciding 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.

Is it possible that no AMT adjustment is necessary for medical expenses in calculating AMTI for a taxpayer who is at least age 65 even though the floor limitation is different (7.5% of AGI for regular income tax compared to 10% for AMT purposes)?

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

Exam 12: Alternative Minimum Tax

Under what circumstances are C corporations exempt from the AMT?

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes,there will be an AMT adjustment.

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

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

Prior to the effect of tax credits,Clarence's regular income tax liability is $200,000 and his tentative AMT is $180,000.Clarence holds nonrefundable business tax credits of $35,000.His tax liability is $165,000.

Paul incurred circulation expenditures of $180,000 in 2016 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for each of 2017,2018,and for 2019.

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

Certain adjustments apply in calculating the corporate AMT that do not apply in calculating the noncorporate AMT and certain adjustments apply in calculating the noncorporate AMT that do not apply in calculating the corporate AMT.

Keosha acquires 10-year personal property to use in her business in 2016 and takes the maximum cost recovery deduction for regular income tax purposes.As a result of this,Keosha will incur a positive AMT adjustment in 2016.

Robin,who is a head of household and age 42,provides you with the following information from his financial records for 2015.Robert itemizes deductions. Regular income tax liability $ 41,527 AMT positive adjustments 30,000 AMT preferences 20,000 Taxable income 181,000 ​ Calculate his AMT for 2016.

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.

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.

In deciding 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.

Is it possible that no AMT adjustment is necessary for medical expenses in calculating AMTI for a taxpayer who is at least age 65 even though the floor limitation is different (7.5% of AGI for regular income tax compared to 10% for AMT purposes)?

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

Robin,who is a head of household and age 42,provides you with the following information from his financial records for 2015.Robert itemizes deductions. Regular income tax liability $ 41,527 AMT positive adjustments 30,000 AMT preferences 20,000 Taxable income 181,000 Calculate his AMT for 2016.