Question 1

For the ACE adjustment, discuss the relationship between ACE and unadjusted AMTI.

Accepted Answer

A positive AMT adjustment occurs if the ACE amount exceeds unadjusted AMTI.A negative AMT adjustment occurs if unadjusted AMTI exceeds the ACE amount.A negative adjustment is limited to the aggregate of the positive adjustments under ACE for prior years, reduced by the previously claimed negative adjustments.

Question 2

Smoke, Inc., provides you with the following information:
  Calculate Smoke's AMT for 2012.

Accepted Answer

Smoke's AMT is calculated as follows:

Question 3

Which of the following itemized deductions definitely will be the same amount for the regular income tax and the AMT and thus result in no AMT adjustment in 2012?

Accepted Answer

A)  Real property taxes.
B)  Medical expenses.
C)  Charitable contributions.
D)  Only b.and c.
E)  a., b., and c. C

Question 4

Tad is a vice-president of Ruby Corporation. In 2012, he acquired 800 shares of Ruby Corporation stock under the corporation's incentive stock option (ISO) plan for an option price of $33 per share. At the date of exercise in 2012, the fair market value of the stock was $43 per share. The stock became freely transferable in 2013. Tad sold the 800 shares for $50 per share in 2014. Which of the following statements is incorrect?

Accepted Answer

A)  Acquisition of the stock in 2012 had no effect on Tad's taxable income, but increased AMTI by $8,000 in 2012.
B)  Tad's regular income tax basis for the stock is $26,400 and his AMT basis is $34,400 in 2012.
C)  Tad must report a negative AMT adjustment of $5,000 in 2013.
D)  Tad will have a positive AMT adjustment of $5,000 in 2014.
E)  All of the above are correct.

Question 5

The AMT adjustment for mining exploration and development costs can be avoided if the taxpayer elects to write off 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 6

In 2012, Sean incurs $90,000 of mining exploration expenditures, and deducts the entire amount for regular income tax purposes.Which of the following statements is correct?

Accepted Answer

A)  For AMT purposes, Sean will have a positive adjustment of $81,000 in 2012.
B)  Sean will have a negative AMT adjustment of $9,000 in 2017.
C)  Over a 10-year period, positive and negative adjustments will net to zero.
D)  Only a.and c.are correct.
E)  a., b., and c.are correct.

Question 7

Celia and Amos, who are married filing jointly, have one dependent and do not itemize deductions. They have taxable income of $82,000 and tax preferences of $53,000 in 2012. What is their AMT base for 2012?

Accepted Answer

A)  $0.
B)  $85,925.
C)  $94,450.
D)  $158,300.
E)  None of the above.

Question 8

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

Accepted Answer

The answer of In calculating her taxable income, Rhonda deducts...

Question 9

In determining the amount of the AMT adjustments, discuss the difference in the treatment of a building placed in service after 1986 and before January 1, 1999 and a building placed in service after December 31, 1998.

Accepted Answer

The answer of In determining the amount of the AMT...

Question 10

Prior to the effect of tax credits, Eunice's regular income tax liability is $325,000 and her tentative AMT is $312,000.Eunice has general business credits available of $20,000.Calculate Eunice's tax liability after tax credits.

Accepted Answer

A)  $0.
B)  $305,000.
C)  $312,000.
D)  $325,000.
E)  None of the above.

Question 11

In 2012, Louise incurs circulation expenses of $330,000 which she deducts in calculating taxable income.

Accepted Answer

The answer of In 2012, Louise incurs circulation expenses of...

Question 12

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)?

Accepted Answer

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

Question 13

Frederick sells land and building whose adjusted basis for regular income tax purposes is $345,000 and for AMT purposes is $380,000.The sales proceeds are $850,000.Determine the effect on:

Accepted Answer

The answer of Frederick sells land and building whose adjusted...

Question 14

Which of the following statements is correct?

Accepted Answer

A)  The AMT calculated under the direct and indirect methods produces the same amount.
B)  The AMT calculated under the direct and the indirect methods produces different amounts.
C)  The tax forms use the direct method to calculate the AMT.
D)  The tax law uses the direct method to calculate the AMT.
E)  None of the above is correct.

Question 15

Assuming no phaseout, the AMT exemption amount for a married taxpayer filing separately for 2012 is less than the AMT exemption amount for C corporations.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Interest income on private activity bonds issued before 2009, reduced by expenses incurred in carrying the bonds, is a tax preference item that is included in computing AMTI.

Accepted Answer

A) True 
 B)False

Question 18

The net capital gain included in an individual taxpayer's AMT base is eligible for the alternative tax rate on net capital gain. This favorable alternative rate applies both in calculating the regular income tax and the AMT.

Accepted Answer

A) True 
 B)False

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Ashlyn is subject to the AMT in 2012.She calculates her AMT base to be $200,000.What are the AMT rates that apply for Ashlyn?

Accepted Answer

The answer of Ashlyn is subject to the AMT in...

Exam 15: Alternative Minimum Tax

For the ACE adjustment, discuss the relationship between ACE and unadjusted AMTI.

Smoke, Inc., provides you with the following information: Calculate Smoke's AMT for 2012.

Which of the following itemized deductions definitely will be the same amount for the regular income tax and the AMT and thus result in no AMT adjustment in 2012?

The AMT adjustment for mining exploration and development costs can be avoided if the taxpayer elects to write off 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.

In 2012, Sean incurs $90,000 of mining exploration expenditures, and deducts the entire amount for regular income tax purposes.Which of the following statements is correct?

Celia and Amos, who are married filing jointly, have one dependent and do not itemize deductions. They have taxable income of $82,000 and tax preferences of $53,000 in 2012. What is their AMT base for 2012?

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

In determining the amount of the AMT adjustments, discuss the difference in the treatment of a building placed in service after 1986 and before January 1, 1999 and a building placed in service after December 31, 1998.

Prior to the effect of tax credits, Eunice's regular income tax liability is $325,000 and her tentative AMT is $312,000.Eunice has general business credits available of $20,000.Calculate Eunice's tax liability after tax credits.

In 2012, Louise incurs circulation expenses of $330,000 which she deducts in calculating taxable income.

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)?

Frederick sells land and building whose adjusted basis for regular income tax purposes is $345,000 and for AMT purposes is $380,000.The sales proceeds are $850,000.Determine the effect on:

Which of the following statements is correct?

Assuming no phaseout, the AMT exemption amount for a married taxpayer filing separately for 2012 is less than the AMT exemption amount for C corporations.

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

Interest income on private activity bonds issued before 2009, reduced by expenses incurred in carrying the bonds, is a tax preference item that is included in computing AMTI.

The net capital gain included in an individual taxpayer's AMT base is eligible for the alternative tax rate on net capital gain. This favorable alternative rate applies both in calculating the regular income tax and the AMT.

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.

Ashlyn is subject to the AMT in 2012.She calculates her AMT base to be $200,000.What are the AMT rates that apply for Ashlyn?