Question 1

Prior to the effect of tax credits, Wayne's regular income tax liability is $175,000 and his tentative AMT is $150,000.Wayne has nonrefundable business tax credits of $40,000.Wayne's tax liability is $135,000.

Accepted Answer

The calculation for Wayne's tax liability would be as follows:
Regular tax liability: $175,000
Tentative AMT: $150,000
Add back nonrefundable credits: $40,000
Total AMT: $190,000
Compare regular tax liability and AMT: $175,000 < $190,000
Therefore, Wayne's tax liability would be his AMT of $190,000, not $135,000 as stated in the question. The correct answer would be B) False.

Question 2

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

The statement is accurate. Congress was concerned about the inequity caused by high-income taxpayers being able to avoid paying regular income tax. The alternative minimum tax was created to ensure that everyone pays at least a minimum amount of tax regardless of deductions and other loopholes.

Question 3

Keosha acquires 10-year personal property to use in her business in 2012 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 2012.

Accepted Answer

Taking the maximum cost recovery deduction for regular income tax purposes can result in a positive AMT adjustment, as the AMT disallows some of the depreciation deductions allowed for regular income tax purposes.

Question 4

If circulation expenditures are amortized over a ten-year period for regular income tax purposes, there will be no AMT adjustment.

Accepted Answer

The answer of If circulation expenditures are amortized over a...

Question 5

Joel placed real property in service in 2012 that cost $900,000 and used MACRS for regular income tax purposes.He is required to make a positive adjustment for AMT purposes in 2012 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 6

The required adjustment for AMT purposes for pollution control facilities placed in service in 2012 is equal to the difference between the amortization deduction allowed for regular income tax purposes and the depreciation deduction computed under ADS.

Accepted Answer

The answer of The required adjustment for AMT purposes for...

Question 7

Moore incurred circulation expenditures of $300,000 in 2012 and deducted that amount for regular income tax purposes.Moore has a $100,000 negative AMT adjustment for 2013, for 2014, and for 2015.

Accepted Answer

The answer of Moore incurred circulation expenditures of $300,000 in...

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 is because once the property is fully depreciated, there are no more adjustments to make for AMT purposes, as there is no longer any tax benefit or detriment to be had from the depreciation. Therefore, any positive and negative adjustments that were made for AMT purposes will have fully offset each other, resulting in a net zero adjustment.

Question 9

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 10

If the AMT base is greater than $175,000, the AMT rate for an individual taxpayer is the same as the AMT rate for a C corporation.

Accepted Answer

The answer of If the AMT base is greater than...

Question 11

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

Accepted Answer

This is true as per the rules of the Alternative Minimum Tax (AMT) system. Timing differences in income and deductions can create negative AMT adjustments for the current year, but such adjustments can be offset by positive AMT adjustments for prior tax years that were also caused by timing differences. This ensures that taxpayers are not doubly penalized for the same timing differences.

Question 12

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

Question 13

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...

Question 14

A tax preference can increase or decrease alternative minimum taxable income while an adjustment can only increase alternative minimum taxable income.

Accepted Answer

A tax preference can only increase alternative minimum taxable income, while an adjustment can either increase or decrease it.

Question 15

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 16

Altrice incurs circulation expenditures of $180,000 in 2012.No additional circulation expenditures are incurred in 2013 or 2014.The cumulative adjustment for circulation expenditures for 2012, 2013, and 2014 is $180,000.

Accepted Answer

The answer of Altrice incurs circulation expenditures of $180,000 in...

Question 17

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 18

Assuming no phaseout, the AMT exemption amount for a married taxpayer filing separately for 2012 is less than the AMT exemption amount for C corporations.

Accepted Answer

The AMT exemption amount for a married taxpayer filing separately for 2012 is $33,750, whereas the AMT exemption amount for C corporations is $40,000. Therefore, the statement is true.

Question 19

The AMT can be calculated using either the direct or the indirect approaches.Both the tax law and the tax forms use the direct approach.

Accepted Answer

The answer of The AMT can be calculated using either...

Question 20

Julia's tentative AMT is $94,000. Her regular income tax liability is $72,000. Julia's AMT is $22,000.

Accepted Answer

The statement is true. The difference between Julia's regular income tax liability and her tentative AMT is $22,000, which means her AMT is $22,000.

Quiz 15: Alternative Minimum Tax