Tanver Corporation,a calendar year corporation,has alternative minimum taxable income of $7 million in 2013 (before adjustment for adjusted current earnings).If Tanver's adjusted current earnings is $16 million,its tentative minimum tax for 2013 is:

Question

Quizplus · Accepted Answer

To calculate the tentative minimum tax, we need to first compare the alternative minimum taxable income (AMTI) with the adjusted current earnings (ACE). 
If AMTI is less than or equal to ACE, the tentative minimum tax is 20% of the excess of AMTI over the exemption amount. 
The exemption amount for 2013 is $40,000, so the excess is $7 million - $40,000 = $6,960,000. 
Tentative minimum tax = 20% * $6,960,000 = $1,392,000. 
However, there is a reduction in the tentative minimum tax based on the amount by which the regular tax exceeds the tentative minimum tax. 
In this case, we don't know the regular tax yet, so we can't calculate the reduction. 
But we do know that the tentative minimum tax can't be less than 90% of the AMT in the prior year. 
Assuming Tanver had AMT of at least $7 million in the prior year, the tentative minimum tax for 2013 would be $6,300,000 (90% of $7 million). 
So the final answer is the higher of the two calculations: 
Tentative minimum tax = max($1,392,000, $6,300,000) = $6,300,000. 
Therefore, the best choice is B.

Tanver Corporation,a Calendar Year Corporation,has Alternative Minimum Taxable Income of $7