Question 1

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

The AMT credit can only be used to offset AMT resulting from timing differences, not for AMT resulting from itemized deductions or exclusion preferences.

Question 2

Vicki owns and operates a news agency (as a sole proprietorship). During 2014, she incurred expenses of $24,000 to increase circulation of newspapers and magazines that her agency distributes. For regular income tax purposes, she elected to expense the $24,000 in 2014. In addition, Vicki incurred $15,000 in circulation expenditures in 2015 and again elected expense treatment. What AMT adjustments will be required in 2014 and 2015 as a result of the circulation expenditures?
A) $16,000 positive in 2014, $2,000 positive in 2015.
B) $16,000 negative in 2014, $2,000 positive in 2015.
C) $16,000 negative in 2014, $10,000 positive in 2015.
D) $16,000 positive in 2014, $10,000 positive in 2015.
E) None of the above.

Accepted Answer

For AMT purposes, circulation expenditures must be capitalized and amortized over 3 years. In 2014, $8,000 of the $24,000 can be deducted, resulting in a $16,000 positive AMT adjustment. In 2015, $5,000 of the $15,000 can be deducted, resulting in a $2,000 positive AMT adjustment.

Question 3

The AMT exemption for a C corporation is $50,000 reduced by 25% of the amount by which AMTI exceeds $150,000.

Accepted Answer

The AMT exemption for a C corporation is not based on a formula that includes AMTI (Alternative Minimum Taxable Income). Instead, it is a flat rate of 20% of the first $175,000 of AMTI plus 14% of AMTI over $175,000.

Question 4

The corporate AMT no longer applies.

Accepted Answer

The answer of The corporate AMT no longer applies....

Question 5

Beula, who is a head of household and age 40, provides you with the following information from her financial records for 2014.
$\begin{array}{lr}
\text { Regular income tax liability } & \$ 35,776 \
\text { AMT positive adjustments } & 33,000 \
\text { AMT preferences } & 25,000 \
\text { Taxable income } & 170,000
\end{array}$

Calculate her AMTI for 2014. 	
A) $0.	
B) $171,300.	
C) $195,925.	
D) $228,000.	
E) None of the above.

Accepted Answer

The answer of Beula, who is a head of household...

Question 6

Which of the following statements is correct?
A) If the tentative AMT is $10,000 and the regular income tax liability is $12,000, the AMT is $2,000.
B) If the tentative AMT is $12,000 and the regular income tax liability is $10,000, the AMT is $12,000.
C) If the tentative AMT is $10,000 and the regular income tax liability is $12,000, the AMT is a negative $2,000.
D) If the tentative AMT is $12,000, and the regular income tax liability is $10,000, the AMT is $2,000.
E) None of the above.

Accepted Answer

The AMT (Alternative Minimum Tax) is the excess amount of the tentative minimum tax over the regular income tax liability. So, in Option D, the tentative AMT is $12,000 and the regular income tax liability is $10,000, so the AMT would be $2,000 ($12,000 - $10,000).

Question 7

Which of the following statements is incorrect?
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) Only b. and c. are incorrect.
E) a., b., and c. are incorrect.

Accepted Answer

The answer of Which of the following statements is incorrect?
A)...

Question 8

Prior to the effect of the tax credits, Justin's regular income tax liability is $200,000 and his tentative AMT is $195,000. Justin has the following credits:
Child tax credit $1,000
Adoption expenses credit 5,000
Calculate Justin's tax liability after credits.
A) $190,000.
B) $194,000.
C) $195,000.
D) $200,000.
E) None of the above.

Accepted Answer

Justin's regular income tax liability is $200,000 and his tentative AMT is $195,000. However, he has two tax credits: child tax credit of $1,000 and adoption expenses credit of $5,000. 
The child tax credit is a non-refundable credit, which means it can only reduce Justin's regular income tax liability and not his tentative AMT. Therefore, his regular income tax liability is reduced by $1,000 to $199,000. 
The adoption expenses credit is also a non-refundable credit, but it can be used to reduce both regular income tax and AMT. Therefore, Justin can use the full $5,000 to reduce his tentative AMT to $190,000. 
Now, comparing his regular income tax liability ($199,000) and his tentative AMT ($190,000), Justin's tax liability after credits is the higher of the two, which is $199,000.

Question 9

If the taxpayer elects to capitalize intangible drilling costs and to amortize them over a 3-year period for regular income tax purposes, there is no adjustment or preference for AMT purposes.

Accepted Answer

For AMT purposes, intangible drilling costs must be capitalized and amortized over a 60-month period, so there would be an adjustment or preference.

Question 10

Jackson sells qualifying small business stock for $125,000 (adjusted basis of $105,000) in 2013. 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 tax preference in calculating Jackson's AMTI.

Accepted Answer

In calculating Jackson's regular income tax,the amount of the 100% exclusion under § 1202 for qualifying small business stock is $20,000 ($20,000 realized gain × 100%).The amount of the AMT tax preference is $1,400 ($20,000 exclusion × 7%).

Question 11

For regular income tax purposes, Yolanda, who is single, is in the 35% tax bracket. Her AMT base is $220,000. Her tentative AMT is:
A) $57,200.
B) $57,950.
C) $61,600.
D) $77,000.
E) None of the above.

Accepted Answer

To calculate the tentative AMT, we need to calculate Yolanda's AMT income by adding back all the adjustments and preferences that were subtracted from her regular taxable income. Since no information is provided about these adjustments and preferences, we assume they are zero for this question. 
Yolanda's AMT income is equal to her AMT base of $220,000. 
The tentative AMT is calculated by applying the AMT tax rates to the AMT income. For 2021, the AMT tax rate is 26% on the first $199,900 of AMT income and 28% on any additional AMT income above this threshold. 
So, the tentative AMT for Yolanda's AMT income of $220,000 is calculated as follows: 
$199,900 x 26% = $51,974
($220,000 - $199,900) x 28% = $6,976
Total tentative AMT = $51,974 + $6,976 = $58,950
Therefore, the answer is B, $57,950, which is the closest choice to the calculated amount.

Question 12

Interest income on private activity bonds issued before 2009 and after 2010, reduced by expenses incurred in carrying the bonds, is a tax preference item that is included in computing AMTI.

Accepted Answer

This statement is true according to the Internal Revenue Code Section 57(a)(5). Interest income on private activity bonds issued before 2009 and after 2010, reduced by expenses incurred in carrying the bonds, is a tax preference item that is added back to taxable income to calculate Alternative Minimum Taxable Income (AMTI).

Question 13

Ashly is able to reduce her regular income tax liability from $47,000 to $43,500 as the result of the alternative tax on net capital gain. Ashly's tentative AMT is $51,000.
A) Ashly's tax liability is reduced by $3,500 as the result of the alternative tax calculation on net capital gain.
B) Ashly's AMT is increased by $3,500 as the result of the alternative tax calculation on net capital gain.
C) Ashly's tax liability is $43,500.
D) Ashly's tax liability is $47,000.
E) None of the above.

Accepted Answer

The alternative tax on net capital gain resulted in a reduction of Ashly's regular tax liability by $3,500, therefore choice A is correct. The fact that her tentative AMT is $51,000 is not directly related to the alternative tax on net capital gain, so choice B is incorrect. The answer cannot be choice C or D, as these options are contradicted by the information provided in the question. Therefore, the best choice is A.

Question 14

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

The corporate and noncorporate AMT have different sets of adjustments, so certain adjustments will apply in one calculation but not the other.

Question 15

Which of the following statements is correct?
A) If the tentative minimum tax exceeds the regular income tax liability, the AMT is $0.
B) The exemption amount decreases as AMTI increases.
C) The AMT tax rate for an individual taxpayer can be as high as 26%.
D) Only a. and c. are correct.
E) a., b., and c. are correct.

Accepted Answer

Choice A is not correct because if the tentative minimum tax exceeds the regular income tax liability, the taxpayer has to pay the higher AMT amount, not $0. Choice C is not correct because the maximum AMT tax rate for individual taxpayers is 28%. Choice D is also incorrect because choice A is not correct. Choice E is incorrect because only choice B is correct. The exemption amount decreases as AMTI increases because the AMT exemption amount is phased out for higher-income taxpayers.

Question 16

C corporations are subject to a positive AMT adjustment equal to 75% of the excess of ACE over AMTI before the ACE adjustment.

Accepted Answer

This statement is true according to the tax code. C corporations are subject to an Alternative Minimum Tax (AMT) adjustment, and the adjustment is equal to 75% of the excess of Adjusted Current Earnings (ACE) over Alternative Minimum Taxable Income (AMTI) before the ACE adjustment.

Question 17

Kay had percentage depletion of $119,000 for the current year for regular income tax purposes. Cost depletion was $60,000. Her basis in the property was $90,000 at the beginning of the current year. Kay must treat the percentage depletion deducted in excess of cost depletion, or $59,000, as a tax preference in computing AMTI.

Accepted Answer

The answer of Kay had percentage depletion of $119,000 for...

Question 18

All of a C corporation's AMT is available for carryover as a minimum tax credit regardless of whether the adjustments and preferences originate from timing differences or AMT exclusions.

Accepted Answer

This is true. Any AMT paid by a C corporation can be carried over as a minimum tax credit regardless of the source of the adjustments and preferences.

Question 19

The AMT exemption for a corporation with $225,000 of AMTI is $18,750.

Accepted Answer

The question refers to the AMT exemption for a corporation, which is different from the AMT exemption for individuals. The current AMT exemption for corporations is $0, meaning that all corporations with AMTI (Alternative Minimum Taxable Income) are subject to alternative minimum tax. Therefore, there is no exemption of $18,750 for a corporation with $225,000 of AMTI.

Question 20

Ashby, who is single and age 30, provides you with the following information from his financial records for 2014.
$\begin{array}{lr}
\text { Regular income tax liability } & \$ 47,228 \
\text { AMT positive adjustments } & 40,000 \
\text { AMT preferences } & 20,000 \
\text { Taxable income } & 195,000
\end{array}$

Calculate his AMT exemption for 2014. 
A) $0.
B) $17,000.
C) $51,900.
D) $52,800.
E) None of the above.

Accepted Answer

The answer of Ashby, who is single and age 30,...

Quiz 15: Alternative Minimum Tax

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.

The AMT exemption for a C corporation is $50,000 reduced by 25% of the amount by which AMTI exceeds $150,000.

The corporate AMT no longer applies.

Which of the following statements is correct?

Which of the following statements is incorrect?

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