Sand Corporation, a calendar year taxpayer, has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE)] of $900,000 for 2014. If Sand's (ACE) is $975,000, its tentative minimum tax for 2014 is:
A) $0.
B) $56,250.
C) $180,000.
D) $191,250.
E) None of the above.

Question

Quizplus · Accepted Answer

The tentative minimum tax is calculated by taking 20% of the alternative minimum taxable income (AMTI) after the ACE adjustment. The ACE adjustment is the excess of ACE over AMTI, which is $75,000 ($975,000 - $900,000). The AMTI after the ACE adjustment is $975,000. Therefore, the tentative minimum tax is 20% of $975,000, which is $195,000. However, the question asks for the tentative minimum tax before any credits, so the correct answer is $191,250, which is 20% of $900,000.

Sand Corporation, a Calendar Year Taxpayer, Has Alternative Minimum Taxable