Question 1

How can the positive AMT adjustment for research and experimental expenditures be avoided?

Accepted Answer

The answer of How can the positive AMT adjustment for...

Question 2

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...

Question 3

Omar acquires used 7-year personal property for $100,000 to use in his business in February 2015.Omar does not elect § 179 expensing,but does take the maximum regular cost recovery deduction.He elects not to take additional first-year depreciation.As a result,Omar will have a positive AMT adjustment in 2015 of what amount?

Accepted Answer

The maximum regular cost recovery deduction for 7-year property is 14.29% (100%/7) and the cost recovery deduction will be $14,290. Since Omar did not elect § 179 expensing, his AMT adjustment will be the difference between his regular tax depreciation and the depreciation calculated under the AMT rules, which is 150% declining balance. The AMT depreciation for 2015 will be $11,710 (($100,000 x 1.5 x 14.29%) - $14,290). Therefore, his positive AMT adjustment will be $3,580 ($14,290 - $11,710).

Question 4

Certain adjustments apply in calculating the corporate AMT that do not apply in calculating the noncorporate AMT and certain adjustments apply in calculating the noncorporate AMT that do not apply in calculating the corporate AMT.

Accepted Answer

The statement is true. There are different adjustments that apply to the corporate AMT and the noncorporate AMT.

Question 5

Durell owns a construction company that builds residential housing.The company is eligible to use the completed contract method for regular income tax purposes.What can Durell do to minimize his AMT?

Accepted Answer

The answer of Durell owns a construction company that builds...

Question 6

In calculating the AMT using the indirect method,do AMT adjustments and AMT tax preferences increase or decrease AMTI?

Accepted Answer

The answer of In calculating the AMT using the indirect...

Question 7

The corporate AMT no longer applies.

Accepted Answer

The answer of The corporate AMT no longer applies....

Question 8

In 2015,Glenn had a $108,000 loss on a passive activity.None of the loss is attributable to AMT adjustments or preferences.She has no other passive activities.Which of the following statements is correct?

Accepted Answer

For regular income tax purposes, a taxpayer can only deduct losses from passive activities to the extent that there is passive activity income to offset the loss. Since Glenn has no other passive activities and none of the loss is attributable to AMT adjustments or preferences, the $108,000 loss cannot be deducted for regular income tax purposes in 2015. However, the loss can be carried forward and deducted in future years when there is passive activity income to offset it.

Question 9

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year.Cost depletion is $19,000.The property qualifies for a 15% depletion rate.Gross income from the property was $200,000 and net income before the percentage depletion deduction was $50,000.What is Eula's tax preference for excess depletion?

Accepted Answer

The answer of Eula owns a mineral property that had...

Question 10

C corporations are subject to a positive AMT adjustment equal to 75% of the excess of ACE over AMTI before the ACE adjustment.

Accepted Answer

This statement is true. C corporations are subject to a positive Alternative Minimum Tax (AMT) adjustment which is equal to 75% of the excess of Adjusted Current Earnings (ACE) over Alternative Minimum Taxable Income (AMTI) before the ACE adjustment.

Question 11

In determining the amount of the AMT adjustments,discuss the difference in the treatment of a building placed in service after 1986 and before January 1,1999 and a building placed in service after December 31,1998.

Accepted Answer

The answer of In determining the amount of the AMT...

Question 12

All of a C corporation's AMT is available for carryover as a minimum tax credit regardless of whether the adjustments and preferences originate from timing differences or AMT preferences.

Accepted Answer

All of a C corporation's AMT is available for carryover as a minimum tax credit regardless of the origin of the adjustments and preferences.

Question 13

Dale owns and operates Dale's Emporium as a sole proprietorship.On January 30,1998,Dale's Emporium acquired a warehouse for $100,000.For regular income tax purposes in 2015,depreciation was deducted under MACRS using a rate of 2.564%.Determine the AMT adjustment for depreciation and indicate whether it is positive or negative.

Accepted Answer

The answer of Dale owns and operates Dale's Emporium as...

Question 14

Will all AMT adjustments reverse? That is,do they relate to timing differences?

Accepted Answer

The answer of Will all AMT adjustments reverse? That is,do...

Question 15

Melinda is in the 35% marginal tax bracket.She has a net capital gain of $150,000 on the sale of land which is eligible for the alternative tax on net capital gain in calculating the regular income tax.Discuss the tax rate that applies to the $150,000 net capital gain in calculating the tentative AMT for Melinda.

Accepted Answer

The answer of Melinda is in the 35% marginal tax...

Question 16

The AMT exemption for a corporation with $225,000 of AMTI is $18,750.

Accepted Answer

The AMT exemption for a corporation with $225,000 of AMTI is not provided in the given information. The answer cannot be determined without additional information.

Question 17

Sand Corporation,a calendar year taxpayer,has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE)] of $900,000 for 2015.If Sand's (ACE)is $975,000,its tentative minimum tax for 2015 is:

Accepted Answer

To calculate the tentative minimum tax for a corporation, we need to compare its Alternative Minimum Taxable Income (AMTI) to its Alternative Minimum Taxable Income computed with the Adjusted Current Earnings (ACE) adjustment. The tentative minimum tax is then the greater of the two amounts multiplied by the applicable tax rate.

In this case, Sand Corporation has an AMTI of $900,000 and an ACE of $975,000. Since the ACE is higher, we need to use it to compute the tentative minimum tax.

The ACE adjustment is computed as follows:

ACE = Regular Taxable Income + Certain Tax Preferences - ACE Adjustment

Since we don't have the details of Sand's tax preferences, we can assume that the ACE adjustment is zero. Therefore:

ACE = Regular Taxable Income 
ACE = $975,000

To compute the tentative minimum tax, we need to compare Sand's AMTI ($900,000) to its ACE ($975,000) and pick the higher amount:

Tentative Minimum Tax = Max[($900,000 - $40,000) * 20%, ($975,000 - $40,000) * 20% + $40,000 * 1.75%]

Tentative Minimum Tax = Max[$176,000, $191,250]

Tentative Minimum Tax = $191,250

Therefore, the answer is D) $191,250.

Question 18

How can an AMT adjustment be avoided for a taxpayer who incurs circulation expenditures in the current tax year?

Accepted Answer

The answer of How can an AMT adjustment be avoided...

Question 19

Vicki owns and operates a news agency (as a sole proprietorship).During 2015,she incurred expenses of $24,000 to increase circulation of newspapers and magazines that her agency distributes.For regular income tax purposes,she elected to expense the $24,000 in 2015.In addition,Vicki incurred $15,000 in circulation expenditures in 2016 and again elected expense treatment.What AMT adjustments will be required in 2015 and 2016 as a result of the circulation expenditures?

Accepted Answer

The answer of Vicki owns and operates a news agency...

Question 20

The AMT exemption for a C corporation is $50,000 reduced by 25% of the amount by which AMTI exceeds $150,000.

Accepted Answer

This statement is incorrect. The AMT exemption for a C corporation is no longer in effect under the current tax law.

Quiz 17: Business Tax Credits and Corporate Alternative Minimum Tax