Question 1

Jake and Christina are married and file a joint return for 2019 with taxable income of $100,000 and tax preferences and adjustments of $30,000 for AMT purposes.Their regular tax liability is $13,717.What is the amount of their total tax liability?
A)$4,758
B)$15,158
C)$13,717
D)$18,475

Accepted Answer

The total tax liability is the greater of the regular tax liability or the AMT liability. Since the regular tax liability is $13,717 and there is no indication that the AMT liability exceeds this amount, the total tax liability remains $13,717.

Question 2

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

Accepted Answer

Not all tax-exempt bond interest income is classified as an AMT preference; only interest from certain private activity bonds is considered a preference item for the Alternative Minimum Tax (AMT).

Question 3

Drake and Davina are married and file a joint return for 2019 with taxable income of $100,000 and tax preferences and adjustments of $65,000 for AMT purposes.Their regular tax liability is $13,717.What is the amount of their total tax liability?
A)$13,858
B)$42,900
C)$25,575
D)$13,717

Accepted Answer

The AMT is calculated by adding tax preferences and adjustments to the regular taxable income and then applying the AMT rates to the resulting amount. In this case, the AMT taxable income is $100,000 + $65,000 = $165,000. The AMT rates are 26% on the first $194,400 of taxable income and 28% on the remaining taxable income. Therefore, the AMT liability is $194,400 x 0.26 + ($165,000 - $194,400) x 0.28 = $42,900. The total tax liability is the regular tax liability plus the AMT liability, which is $13,717 + $42,900 = $56,617.

Question 4

Mortgage interest paid on a mortgage obtained to buy a principal residence,deductible for regular income tax purposes,is also an allowable deduction for AMT.

Accepted Answer

Mortgage interest paid on a mortgage for a principal residence is deductible for both regular income tax and the Alternative Minimum Tax (AMT) purposes.

Question 5

Reva and Josh Lewis had alternative minimum taxable income of $1,200,000 in 2019 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is
A)$66,850.
B)$71,700.
C)$0.
D)$111,700.

Accepted Answer

The exemption for joint filers for the alternative minimum tax is $71,700 in 2019.

Question 6

A taxpayer is calculating this year's depreciation deduction on equipment placed in service in 2016.For AMT purposes,depreciation must be recalculated using the straight-line method over the same recovery period used for regular tax purposes.

Accepted Answer

The answer of A taxpayer is calculating this year's depreciation...

Question 7

For purposes of the AMT,certain itemized deductions are disallowed,but the standard deduction is allowed.

Accepted Answer

The Alternative Minimum Tax (AMT) disallows the standard deduction, not allowing it as a deduction option.

Question 8

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

Accepted Answer

The answer of An example of an AMT tax preference...

Question 9

Suzanne,a single taxpayer,has the following tax information for the current year. • Charitable contribution of real property with a FMV of $25,000 (adjusted basis $20,000)for which a $25,000 deduction was taken for regular tax.
• Research and experimental expenses of $40,000 deducted in full for regular tax.
Suzanne's total tax preferences and adjustments equals
A)$5,000.
B)$36,000.
C)$41,000.
D)$45,000.

Accepted Answer

The answer of Suzanne,a single taxpayer,has the following tax information...

Question 10

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 AMT allows certain nonrefundable personal credits, such as the child tax credit, to reduce the tentative minimum tax, not just the foreign tax credit and refundable personal credits.

Question 11

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

Accepted Answer

The answer of A taxpayer acquired an office building to...

Question 12

Mr.and Mrs.Lewis have an alternative minimum tax base of $312,000 in 2019.Their tentative minimum tax will be
A)$81,120.
B)$87,360.
C)$52,078.
D)$83,464.

Accepted Answer

The answer of Mr.and Mrs.Lewis have an alternative minimum tax...

Question 13

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her
A)taxable income.
B)alternative minimum tax base.
C)alternative minimum taxable income.
D)tentative alternative taxable income.

Accepted Answer

The answer of Harley's tentative minimum tax is computed by...

Question 14

In computing AMTI,all of the following must be added back except
A)home mortgage interest (on mortgage in effect since home was purchased).
B)state income taxes.
C)property taxes on an individual's home.
D)All of the itemized deductions noted above must be added back.

Accepted Answer

Home mortgage interest on a mortgage in effect since the home was purchased is not added back when computing Alternative Minimum Taxable Income (AMTI).

Question 15

All of the following are allowable deductions under the alternative minimum tax except
A)charitable contributions.
B)medical expenses.
C)qualified housing interest.
D)state income taxes.

Accepted Answer

State income taxes are not deductible under the alternative minimum tax (AMT) rules.

Question 16

In 2019,Charlton and Cindy have alternative minimum taxable income of $230,000 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is
A)$0.
B)$24,400.
C)$71,700.
D)$111,700.

Accepted Answer

For 2019, the AMT exemption for married couples filing jointly is $111,700.

Question 17

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

Accepted Answer

The alternative minimum tax (AMT) is designed to ensure that individuals pay at least a minimum amount of tax. It applies only if it exceeds the taxpayer's regular income tax liability, effectively acting as a floor on the amount of tax owed.

Question 18

In computing AMTI,adjustments are
A)limited.
B)added only.
C)subtracted only.
D)either added or subtracted.

Accepted Answer

AMTI adjustments can either be added or subtracted depending on their nature. For instance, income earned abroad can be added while foreign taxes paid can be subtracted. Therefore, option D (either added or subtracted) is the best answer.

Question 19

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

This is true as any amount of AMT paid in prior years that exceeds the regular tax liability can be used as a credit against the regular tax liability in future years when the taxpayer is not subject to AMT.

Question 20

In computing AMTI,tax preference items are
A)excluded.
B)added only.
C)subtracted only.
D)either added or subtracted.

Accepted Answer

The answer of In computing AMTI,tax preference items are
A)excluded.
B)added only.
C)subtracted...

Quiz 30: Special Tax Computation Methods,tax Credits,and Payment of Tax

Jake and Christina are married and file a joint return for 2019 with taxable income of $100,000 and tax preferences and adjustments of $30,000 for AMT purposes.Their regular tax liability is $13,717.What is the amount of their total tax liability?

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

Drake and Davina are married and file a joint return for 2019 with taxable income of $100,000 and tax preferences and adjustments of $65,000 for AMT purposes.Their regular tax liability is $13,717.What is the amount of their total tax liability?

Mortgage interest paid on a mortgage obtained to buy a principal residence,deductible for regular income tax purposes,is also an allowable deduction for AMT.

Reva and Josh Lewis had alternative minimum taxable income of $1,200,000 in 2019 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

A taxpayer is calculating this year's depreciation deduction on equipment placed in service in 2016.For AMT purposes,depreciation must be recalculated using the straight-line method over the same recovery period used for regular tax purposes.

For purposes of the AMT,certain itemized deductions are disallowed,but the standard deduction is allowed.

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

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

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

Mr.and Mrs.Lewis have an alternative minimum tax base of $312,000 in 2019.Their tentative minimum tax will be

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

In computing AMTI,all of the following must be added back except

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

In 2019,Charlton and Cindy have alternative minimum taxable income of $230,000 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

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

In computing AMTI,adjustments are

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.

In computing AMTI,tax preference items are