Question 1

Interest on a home equity loan may be deductible for AMT purposes.

Accepted Answer

Interest on a home equity loan may be deductible for AMT (Alternative Minimum Tax) purposes under certain circumstances, such as when the loan proceeds are used to improve the taxpayer's primary or secondary residence. However, it is important to consult with a tax professional for specific advice on individual situations.

Question 2

Income from some long-term contracts can be reported using the completed contract method for regular income tax purposes, but the percentage of completion method is required for AMT purposes for all long-term contracts.

Accepted Answer

Under the AMT rules, all long-term contracts must be accounted for under the percentage of completion method, regardless of how they are reported for regular income tax purposes.

Question 3

The amount of the deduction for medical expenses under the regular income tax may be different than for AMT purposes.

Accepted Answer

The AMT disallows certain deductions, including some medical expenses, which can result in a different deduction amount compared to the regular income tax.

Question 4

Evan is a contractor who constructs both commercial and residential buildings. Even though some of the contracts could qualify for the use of the completed contract method, Evan decides to use the percentage of the completion method for all of his contracts. Therefore, no AMT adjustment is required.

Accepted Answer

The answer of Evan is a contractor who constructs both...

Question 5

Kerri, who had AGI of $120,000, itemized her deductions in the current year.She incurred unreimbursed employee business expenses of $8,500.Kerri must make a positive AMT adjustment of $2,400 in computing AMT.

Accepted Answer

The answer of Kerri, who had AGI of $120,000, itemized...

Question 6

In 2012, Ben exercised an incentive stock option (ISO), acquiring stock with a fair market value of $190,000 for $170,000.His AMT basis for the stock is $170,000, his regular income tax basis for the stock is $170,000, and his AMT adjustment is $0 ($170,000 - $170,000).

Accepted Answer

The answer of In 2012, Ben exercised an incentive stock...

Question 7

If the regular income tax deduction for medical expenses is $0, under certain circumstances the AMT deduction for medical expenses can be greater than $0.

Accepted Answer

The answer of If the regular income tax deduction for...

Question 8

Nell has a personal casualty loss deduction of $14,500 for regular income tax purposes. The deduction would have been $26,600, but it had to be reduced by $100 and by $12,000 (10% ´ $120,000 AGI). For AMT purposes, the casualty loss deduction is $26,600.

Accepted Answer

For AMT purposes, the personal casualty loss deduction is also subject to the 10% AGI limitation, so it would also be reduced to $14,500. Therefore, the statement is false.

Question 9

The exercise of an incentive stock option (ISO) increases both the AMTI and regular taxable income in the year of exercise.

Accepted Answer

The answer of The exercise of an incentive stock option...

Question 10

The deduction for charitable contributions in calculating the regular income tax can differ from that in calculating the AMT because the percentage limitations (20%, 30%, and 50%) may be applied to a different base amount.

Accepted Answer

The answer of The deduction for charitable contributions in calculating...

Question 11

The AMT adjustment for mining exploration and development costs can be avoided if the taxpayer elects to write off the expenditures in the year incurred for regular income tax purposes, rather than writing off the expenditures over a 10-year period for regular income tax purposes.

Accepted Answer

The answer of The AMT adjustment for mining exploration and...

Question 12

Tricia sold land that originally cost $105,000 for $112,000.There is a positive AMT adjustment of $7,000 associated with the sale of the land.

Accepted Answer

The answer of Tricia sold land that originally cost $105,000...

Question 13

The recognized gain for regular income tax purposes and the recognized gain for AMT purposes on the sale of stock acquired under an incentive stock option (ISO) program are always the same because the adjusted basis is the same.

Accepted Answer

The recognized gain for regular income tax purposes and the recognized gain for AMT purposes can differ because the adjusted basis for AMT purposes is calculated differently than for regular income tax purposes. Specifically, for AMT purposes, the adjusted basis is increased by any AMT adjustment related to the exercise of the ISO.

Question 14

The sale of business property might result in an AMT adjustment.

Accepted Answer

When a business property is sold, there is a possibility of triggering an alternative minimum tax (AMT) adjustment, which could result in higher taxes owed. This is because the AMT system limits certain deductions and exemptions that are allowed under regular tax rules. Therefore, in some cases, the sale of business property could push a taxpayer into the AMT system and result in an adjustment.

Question 15

AGI is used as the base for application of percentage limitations (i.e., 20%, 30%, 50%) that apply to the charitable contribution deduction for regular income tax purposes. Modified AGI is used as the base for application of percentage limitations that apply to the charitable contribution deduction for AMT purposes.

Accepted Answer

The answer of AGI is used as the base for...

Question 16

Tammy expensed mining exploration and development costs of $100,000 incurred in 2012.She will be required to make negative AMT adjustments for each of the next nine years and a positive AMT adjustment in the current tax year.

Accepted Answer

Mining exploration and development costs are subject to AMT adjustments. Tammy will need to make negative AMT adjustments for the next nine years to reflect the expenses incurred in 2012, and a positive AMT adjustment in the current tax year to reflect any current deductions taken for those expenses.

Question 17

If a gambling loss itemized deduction is permitted for regular income tax purposes, there will be no AMT adjustment associated with the gambling loss.

Accepted Answer

The answer of If a gambling loss itemized deduction is...

Question 18

The deduction for personal and dependency exemptions is allowed for regular income tax purposes, but is disallowed for AMT purposes. This results in a positive AMT adjustment.

Accepted Answer

The deduction for personal and dependency exemptions is a common positive adjustment for the Alternative Minimum Tax.

Question 19

The AMT adjustment for research and experimental expenditures can be avoided if the taxpayer capitalizes the expenditures and amortizes them over a 10-year period.

Accepted Answer

By capitalizing and amortizing research and experimental expenditures over a 10-year period, the taxpayer can avoid the AMT adjustment for these expenses.

Question 20

Because passive losses are not deductible in computing either taxable income or AMTI, no adjustment for passive losses is required for AMT purposes.

Accepted Answer

The answer of Because passive losses are not deductible in...

Quiz 15: Alternative Minimum Tax