Question 1

The required adjustment for AMT purposes for pollution control facilities placed in service in 2015 is equal to the difference between the amortization deduction allowed for regular income tax purposes and the depreciation deduction computed under ADS.

Accepted Answer

False

Question 2

The AMT calculated using the indirect method will produce a different amount than the AMT calculated using the direct method.

Accepted Answer

The AMT calculated using either method will produce the same amount. The difference between the two methods is in how certain adjustments are made to arrive at the AMT.

Question 3

In deciding to enact the alternative minimum tax,Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

Accepted Answer

This statement is true. The alternative minimum tax (AMT) was created to ensure that taxpayers with high incomes and multiple deductions were not able to completely avoid paying federal income tax. The AMT sets a minimum tax rate that must be paid by certain taxpayers, regardless of their deductions and credits.

Question 4

Business tax credits reduce the AMT and the regular income tax in the same way.

Accepted Answer

Business tax credits can reduce both the AMT (Alternative Minimum Tax) and the regular income tax, but they may not reduce them in the same way due to the different calculations and rules applied to the AMT versus the regular tax system.

Question 5

Prior to the effect of tax credits,Clarence's regular income tax liability is $200,000 and his tentative AMT is $180,000.Clarence has nonrefundable business tax credits of $35,000.His tax liability is $165,000.

Accepted Answer

The nonrefundable business tax credits of $35,000 can only reduce the regular tax liability and not the AMT liability. Therefore, Clarence's tax liability cannot be reduced to $165,000.

Question 6

Since most tax preferences are merely timing differences,they eventually will reverse and net to zero.

Accepted Answer

The answer of Since most tax preferences are merely timing...

Question 7

Assuming no phaseout,the AMT exemption amount for a married taxpayer filing separately for 2015 is more than the AMT exemption amount for C corporations.

Accepted Answer

As of 2015, the AMT exemption amount for a married taxpayer filing separately is $53,600, while the AMT exemption amount for C corporations is $40,000. Therefore, the statement is true.

Question 8

After personal property is fully depreciated for both regular income tax purposes and AMT purposes,the positive and negative adjustments that have been made for AMT purposes will net to zero.

Accepted Answer

This statement is true. Once personal property has been fully depreciated for both regular income tax purposes and AMT purposes, there will be no further depreciation adjustments to make for AMT purposes. Any positive and negative adjustments made up to that point will net to zero, as there will be no more AMT adjustments to make.

Question 9

Paul incurred circulation expenditures of $180,000 in 2015 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for 2016,2017,and for 2018.

Accepted Answer

The answer of Paul incurred circulation expenditures of $180,000 in...

Question 10

Keosha acquires 10-year personal property to use in her business in 2015 and takes the maximum cost recovery deduction for regular income tax purposes.As a result of this,Keosha will have a positive AMT adjustment in 2015.

Accepted Answer

Taking the maximum cost recovery deduction for regular income tax purposes may result in a positive AMT adjustment, as the AMT uses different rules for determining allowable deductions and may disallow some deductions that are allowed for regular income tax purposes.

Question 11

If Abby's alternative minimum taxable income exceeds her regular taxable income,she will have an alternative minimum tax.

Accepted Answer

The answer of If Abby's alternative minimum taxable income exceeds...

Question 12

If the AMT base is greater than $185,400,the AMT rate for an individual taxpayer is the same as the AMT rate for a C corporation.

Accepted Answer

The AMT rate for individual taxpayers is different from the AMT rate for C corporations.

Question 13

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

Accepted Answer

The statement is true. The net capital gain included in an individual taxpayer's AMT base is eligible for the beneficial alternative tax rate on net capital gain, which applies in both the calculation of regular income tax and AMT. This provision was introduced to provide relief to taxpayers from the higher tax rates that could otherwise be applied under AMT.

Question 14

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes,there will be an AMT adjustment.

Accepted Answer

According to IRS regulations, unless circulation expenditures are amortized over a three-year period for regular income tax purposes, there will be an Alternative Minimum Tax (AMT) adjustment.

Question 15

Joel placed real property in service in 2015 that cost $900,000 and used MACRS depreciation for regular income tax purposes.He is required to make a positive adjustment for AMT purposes in 2015 for the excess of depreciation calculated for regular income tax purposes over the depreciation calculated for AMT purposes.

Accepted Answer

The answer of Joel placed real property in service in...

Question 16

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

Accepted Answer

Negative AMT adjustments for the current year are typically caused by differences in timing between when income is recognized for regular tax purposes versus AMT purposes. These timing differences can be positive AMT adjustments in prior tax years. Therefore, the negative and positive adjustments can offset each other.

Question 17

A taxpayer who expenses circulation expenditures in the year incurred for regular income tax purposes will have a positive AMT adjustment in the following year.

Accepted Answer

Taxpayers cannot expense circulation expenditures in the year incurred for AMT purposes, so there would be no positive AMT adjustment in the following year.

Question 18

AMT adjustments can be positive or negative,whereas AMT preferences are always positive.

Accepted Answer

AMT adjustments can increase or decrease taxable income, so they can be either positive or negative. However, AMT preferences are tax deductions or exclusions that are always positive and increase a taxpayer's AMT liability.

Question 19

Madge's tentative minimum tax TMT is $112,000.Her regular income tax liability is $99,000.Madge's AMT is $13,000.

Accepted Answer

The total of Madge's regular income tax liability and AMT equals her tentative minimum tax, which is:

$99,000 + $13,000 = $112,000

Therefore, the statement is true.

Question 20

The phaseout of the AMT exemption amount for a taxpayer filing as a head of household both begins and ends at a higher income level than it does for a single taxpayer.

Accepted Answer

The answer of The phaseout of the AMT exemption amount...

Quiz 15: Alternative Minimum Tax