Question 1

If a gambling loss itemized deduction is permitted for regular income tax purposes,the amount of the gambling loss itemized deduction for AMT purposes is the same.

Accepted Answer

For both regular tax and AMT purposes, gambling losses are deductible to the extent of gambling winnings, so the treatment is the same.

Question 2

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 3

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

Accepted Answer

This is true. Taxpayers have the option to elect to amortize mining exploration and development costs over a 10-year period in order to avoid the AMT adjustment.

Question 4

The deduction for charitable contributions in calculating the regular income tax is not the same as that in calculating the AMT.

Accepted Answer

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

Question 5

If Faye's standard deduction exceeds her itemized deductions,there will be no AMT adjustment.

Accepted Answer

The answer of If Faye's standard deduction exceeds her itemized...

Question 6

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 7

Land that originally cost $100,000 is sold for $80,000.There is a negative AMT adjustment of $20,000 associated with the sale of the land.

Accepted Answer

The answer of Land that originally cost $100,000 is sold...

Question 8

Tammy expensed mining exploration and development costs of $100,000 incurred in 2010.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 special tax treatment and must be capitalized rather than expensed for regular tax purposes. However, they are deductible as a negative adjustment for AMT purposes over a period of 10 years, beginning in the year the costs were incurred. Therefore, Tammy 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.

Question 9

If all long-term contracts are accounted for under the percentage of completion method for regular income tax purposes,no adjustment is required for AMT purposes.

Accepted Answer

Under the percentage of completion method, income and expenses are recognized as a percentage of the project's completion. This method is used for long-term contracts that are expected to take more than one year to complete. For AMT purposes, no adjustment is required because the percentage of completion method is already used for regular income tax purposes.

Question 10

For a building placed in service before 1999,the adjusted basis can be different for regular income tax purposes and for AMT purposes.

Accepted Answer

Prior to 1999, tax laws allowed for different methods of depreciation for regular income tax purposes and for AMT purposes, which could result in different adjusted bases for the same asset.

Question 11

In 2010,Daniel exercised an incentive stock option (ISO),acquiring stock with a fair market value of $210,000 for $165,000.His AMT basis for the stock is $210,000,his regular income tax basis for the stock is $165,000,and his AMT adjustment is $45,000 ($210,000 - $165,000).

Accepted Answer

This statement is true. The AMT basis for ISO stock is the fair market value at the time of exercise, while the regular income tax basis is the amount paid for the stock. Therefore, Daniel's AMT basis is $210,000 and his regular income tax basis is $165,000. The AMT adjustment is the difference between the AMT basis and the regular income tax basis, which in this case is $45,000 ($210,000 - $165,000).

Question 12

For AMT purposes,taxpayers must capitalize and amortize research and experimental expenditures over a 10-year period.

Accepted Answer

This statement is true. For AMT (Alternative Minimum Tax) purposes, taxpayers must capitalize and amortize research and experimental expenditures over a 10-year period. This is different from regular tax rules, where taxpayers may elect to deduct research and development expenses in the year they are incurred.

Question 13

The deduction for personal and dependency exemptions usually is allowed for regular income tax purposes,but is disallowed for AMT purposes.

Accepted Answer

This statement is true. The deduction for personal and dependency exemptions is disallowed for AMT purposes, meaning individuals subject to the AMT cannot claim this deduction.

Question 14

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

This statement is true. For regular income tax purposes, a contractor can choose between using the completed contract method or the percentage of completion method to report income from long-term contracts. However, for Alternative Minimum Tax (AMT) purposes, the percentage of completion method is required for all long-term contracts.

Question 15

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

Accepted Answer

The interest on a home equity loan may be deductible for AMT (Alternative Minimum Tax) purposes, subject to certain limitations and conditions. However, it may not be deductible for regular federal income tax purposes if the loan was not used to buy, build, or substantially improve the taxpayer's home that secures the loan. It is important to consult a tax professional for specific advice on deductibility of home equity loan interest.

Question 16

Losses associated with a passive activity owned by an individual are not deductible against active income or portfolio income in computing either the regular income tax or the AMT.

Accepted Answer

Losses from passive activities can only be offset against income from other passive activities or carried forward to future years when there is sufficient passive income to offset them. They cannot be used to reduce taxes on active or portfolio income.

Question 17

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 adjusted basis for AMT purposes may be different from that for regular income tax purposes, which can result in a different recognized gain for AMT purposes on the sale of stock acquired under an ISO program.

Question 18

Medical expenses are reduced by 10% of AGI to compute the amount deductible for AMT purposes and 7.5% of AGI for regular income tax purposes.

Accepted Answer

Medical expenses are reduced by 10% of AGI for AMT purposes and 7.5% of AGI for regular income tax purposes.

Question 19

Frances,who had AGI of $100,000,itemized her deductions in the current year.She incurred unreimbursed employee business expenses of $6,200.Frances must make a positive AMT adjustment of $2,000 in computing AMT.

Accepted Answer

The answer of Frances,who had AGI of $100,000,itemized her deductions...

Question 20

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...

Quiz 15: Alternative Minimum Tax