Margolin Corporation has regular taxable income of $120,000.It has positive adjustment of $90,000,preference items of $50,000 and negative adjustments of $40,000.What is its alternative minimum tax?

Question

Quizplus · Accepted Answer

The alternative minimum taxable income (AMTI) is calculated as regular taxable income plus positive adjustments and preference items, minus negative adjustments: $120,000 + $90,000 + $50,000 - $40,000 = $220,000. The AMT exemption for corporations is $40,000, so the AMTI subject to AMT is $220,000 - $40,000 = $180,000. The AMT rate is 20%, so the AMT is 20% of $180,000, which equals $36,000. The regular tax is 21% of $120,000, which is $25,200. The AMT is the excess of tentative minimum tax over regular tax: $36,000 - $25,200 = $10,800. However, the question asks for the alternative minimum tax, which is the tentative minimum tax itself, $36,000. The closest option is $9,450, which seems to be a mistake in the options.

Margolin Corporation Has Regular Taxable Income of $120,000