Question 1

Casualty and theft losses in excess of 10% of AGI are deductible for AMT purposes.

Accepted Answer

The AMT provisions do not require an adjustment for casualty and theft losses.

Question 2

The alternative minimum tax applies to individuals, corporations, estates, and trusts.

Accepted Answer

The AMT applies to all types of federal income taxpayers.

Question 3

For purposes of the AMT, the standard deduction, but not the personal and dependency exemptions, is allowed.

Accepted Answer

Neither the standard deduction nor personal and dependency exemptions are allowed for AMT.

Question 4

Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2015 and file a joint return. For purposes of computing the alternative minimum tax, their exemption is

Accepted Answer

11eac5e3_b0fe_d4b7_a396_cf4b7f7f4987_TB5639_00

Question 5

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her

Accepted Answer

The tentative minimum tax is computed by multiplying the alternative minimum tax base (AMTI less the exemption) times the tax rate.

Question 6

In computing AMTI, adjustments are

Accepted Answer

While most adjustments increase the AMT tax base, the AMT tax base may be reduced when the timing differences reverse.

Question 7

The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability.

Accepted Answer

The AMT serves as a tax floor so it will only be paid if it exceeds the regular tax.

Question 8

Drake and Davina are married and file a joint return for 2015 with taxable income of $100,000 and tax preferences and adjustments of $51,000 for AMT purposes. Their regular tax liability is $16,713. What is the amount of their total tax liability?

Accepted Answer

The amount of AMTI is $151,000. Their AMT base $151,000 - $83,400 or $67,600. Their TMT is $67,600 × .26 = $17,576. Their tax liability is the greater of the TMT or regular tax, in this case, $17,576.

Question 9

Jake and Christina are married and file a joint return for 2015 with taxable income of $100,000 and tax preferences and adjustments of $20,000 for AMT purposes. Their regular tax liability is $16,713. What is the amount of their total tax liability?

Accepted Answer

The amount of AMTI is $120,000. Their AMT base $120,000 - $83,400 or $36,600. Their TMT is $36,600 × .26 = $9,516. Their tax liability is the greater of the TMT or regular tax, in this case, $16,713.

Question 10

A taxpayer who paid AMT in prior years, but is not subject to the AMT in the current year, may be entitled to an AMT credit against his regular tax liability in the current year.

Accepted Answer

To the extent that AMT is due to temporary differences, a minimum tax credit carryover is generated for use in a future, non-AMT year.

Question 11

For purposes of the AMT, only the foreign tax credit and refundable personal credits are allowed to reduce the tentative minimum tax.

Accepted Answer

The foreign tax credit and nonrefundable personal credits reduce the tentative minimum tax.

Question 12

Medical expenses in excess of 10% of AGI are deductible when computing AMT.

Accepted Answer

Medical expenses in excess of 10% of AGI are deductible for both regular tax and AMT starting in 2013.

Question 13

In computing the alternative minimum taxable income, no deduction is allowed for

Accepted Answer

Personal and dependency exemptions are added back to taxable income to get alternative minimum taxable income.

Question 14

A taxpayer acquired new equipment to be used in her business this year. For AMT purposes, depreciation must be recalculated using the straight-line method over the same recovery period used for regular tax purposes.

Accepted Answer

Depreciation must be recalculated using the 150% declining balance method.

Question 15

In computing AMTI, tax preference items are

Accepted Answer

All tax preferences are added to compute the tax base for AMT.

Question 16

A taxpayer acquired an office building to be used in her business this year. For AMT purposes, depreciation must be re-calculated using the straight-line method over 40 years.

Accepted Answer

There is no AMT depreciation adjustment for real property placed in service after December 31, 1998.

Question 17

All of the following are allowable deductions under the alternative minimum tax except

Accepted Answer

Charitable contributions, qualified housing interest, and gambling losses are all itemized deductions that are allowed for AMT purposes. State income taxes are not.

Question 18

All tax-exempt bond interest income is classified as an AMT preference.

Accepted Answer

Interest on private activity municipal bond interest is an AMT preference item, but interest income from general purpose bonds is not a preference item.

Question 19

An example of an AMT tax preference is the excess of MACRS depreciation on equipment over depreciation computed by using the the 150% declining balance method.

Accepted Answer

The AMT modification in the question is an adjustment, not a preference.

Question 20

In 2015 Charlton and Cindy have alternative minimum taxable income of $130,000 and file a joint return. For purposes of computing the alternative minimum tax, their exemption is

Accepted Answer

The exemption for a married couple filing a joint return with AMTI of $158,900 or less is $83,400 in 2015.

Quiz 14: Special Tax Computation Methods, Tax Credits, and Payment of Tax