Question 1

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 2

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 3

Elmer exercises an incentive stock option (ISO) in 2014 for $6,000 (fair market value of the stock on the exercise date is $7,600). If Elmer sells the stock later in 2014 for $8,000, the AMT positive adjustment is $1,600 and the AMT negative adjustment is $2,000.

Accepted Answer

An AMT adjustment is not required as Elmer exercised the stock option and sold the stock in the same tax year.

Question 4

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 also is $14,500.

Accepted Answer

The information provided clearly states that the casualty loss deduction for AMT purposes is also $14,500, which makes the statement true.

Question 5

Interest on a home equity loan cannot be deducted for AMT purposes.

Accepted Answer

The answer of Interest on a home equity loan cannot...

Question 6

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 statement is correct. The deduction for personal and dependency exemptions is disallowed for AMT purposes, resulting in a positive AMT adjustment.

Question 7

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. Unfortunately, this will have the effect of increasing Evan's AMT adjustment associated with long-term contracts for the current year.

Accepted Answer

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

Question 8

In the current tax year, 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 the current tax year, Ben exercised...

Question 9

The amount of the deduction for medical expenses under the regular income tax may be different than for AMT purposes if the taxpayer is at least age 65.

Accepted Answer

If a taxpayer is at least age 65, they can deduct medical expenses that exceed 7.5% of their adjusted gross income for both regular income tax and AMT purposes. However, starting in 2019, the threshold for deducting medical expenses was increased to 10% of adjusted gross income for taxpayers under age 65, but it remained at 7.5% for those age 65 and older.

Question 10

Benita expensed mining exploration and development costs of $500,000 incurred in the current tax year. She will be required to make negative AMT adjustments for each of the next ten years and a positive AMT adjustment in the current tax year.

Accepted Answer

The answer of Benita expensed mining exploration and development costs...

Question 11

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. The completed contract method is an acceptable method of accounting for long-term contracts for regular income tax purposes, but the percentage of completion method is required for AMT (Alternative Minimum Tax) purposes. This is because the AMT system aims to eliminate certain tax benefits and encourages the use of more conservative accounting methods to reduce the potential for tax shelters.

Question 12

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 13

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 14

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

This is true. If the taxpayer capitalizes the research and experimental expenditures and amortizes them over a 10-year period, they can avoid the AMT adjustment for these expenditures.

Question 15

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

Accepted Answer

The sale of business property can result in an AMT adjustment. This is because the alternative minimum tax (AMT) has different rules for calculating gain or loss on the sale of property compared to regular tax rules. The AMT adjustment can affect the taxpayer's overall tax liability.

Question 16

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 on the sale of stock acquired under an ISO program can be different because the adjusted basis may be different due to adjustments made for AMT purposes.

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

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 19

Cher sold undeveloped land that originally cost $150,000 for $225,000. There is a positive AMT adjustment of $75,000 associated with the sale of the land.

Accepted Answer

The answer of Cher sold undeveloped land that originally cost...

Question 20

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...

Quiz 15: Alternative Minimum Tax