Question 1

Kay had percentage depletion of $119,000 for the current year for regular income tax purposes.Cost depletion was $60,000.Her basis in the property was $90,000 at the beginning of the current year.Kay must treat the percentage depletion deducted in excess of cost depletion,or $59,000,as a tax preference in computing AMTI.

Accepted Answer

The answer of Kay had percentage depletion of $119,000 for...

Question 2

All foreign taxes qualify for the foreign tax credit.

Accepted Answer

Not all foreign taxes qualify for the foreign tax credit. In order to qualify, the foreign tax must be a legal and actual foreign tax liability imposed on the taxpayer, and must have been paid or accrued by the taxpayer. There are also certain taxes that are specifically excluded from the foreign tax credit, such as taxes that are not income taxes or taxes that are refundable.

Question 3

In deciding to enact the alternative minimum tax,Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

Accepted Answer

Congress enacted the alternative minimum tax because they were concerned about the inequity of taxpayers with high economic incomes avoiding paying regular income tax.

Question 4

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours.The credit for employer-provided child care available to BlueCo this year is $225,000.

Accepted Answer

The credit for employer-provided child care facilities is limited to 25% of the qualified expenses, plus 10% of qualified resource and referral expenditures, with an overall limit of $150,000 per year. Therefore, 25% of $900,000 is $225,000, but the credit cannot exceed $150,000.

Question 5

AMT adjustments can be positive or negative,whereas AMT preferences are always positive.

Accepted Answer

AMT adjustments can increase or decrease an individual's taxable income under the AMT, so they can be positive or negative. However, AMT preferences are always positive and add to an individual's taxable income under the AMT.

Question 6

The required adjustment for AMT purposes for pollution control facilities placed in service in 2013 is equal to the difference between the amortization deduction allowed for regular income tax purposes and the depreciation deduction computed under ADS.

Accepted Answer

The answer of The required adjustment for AMT purposes for...

Question 7

Unused foreign tax credits can be carried back three years and forward fifteen years.

Accepted Answer

The answer of Unused foreign tax credits can be carried...

Question 8

Because current U.S.corporate income tax rates are higher than many foreign corporate income tax rates,the overall limitation does not yield a lower foreign tax credit than the amount of foreign taxes actually paid.

Accepted Answer

This statement is true. The overall limitation on the foreign tax credit is calculated on a per-country basis, so if the U.S. corporate tax rate is higher than the foreign tax rate, the limitation will not reduce the foreign tax credit below the amount of foreign taxes actually paid.

Question 9

Paul incurred circulation expenditures of $180,000 in 2013 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for 2014,2015,and for 2016.

Accepted Answer

The answer of Paul incurred circulation expenditures of $180,000 in...

Question 10

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 may be used for regular income tax purposes for long-term contracts, but the percentage of completion method is required for AMT purposes. This is because the AMT system tends to accelerate income recognition compared to the regular tax system.

Question 11

Keosha acquires 10-year personal property to use in her business in 2013 and takes the maximum cost recovery deduction for regular income tax purposes.As a result of this,Keosha will have a positive AMT adjustment in 2013.

Accepted Answer

The maximum cost recovery deduction for regular income tax purposes may not be the same as the deduction allowed for AMT purposes. Therefore, Keosha will have a positive AMT adjustment in 2013.

Question 12

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes,there will be an AMT adjustment.

Accepted Answer

According to IRS rules, if circulation expenditures are not amortized over a three-year period for regular income tax purposes, there will be an adjustment for Alternative Minimum Tax (AMT) purposes. This means that the expenses may not be fully deductible for AMT purposes, leading to a higher tax liability for the taxpayer.

Question 13

The corporate AMT no longer applies.

Accepted Answer

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

Question 14

Since most tax preferences are merely timing differences,they eventually will reverse and net to zero.

Accepted Answer

The answer of Since most tax preferences are merely timing...

Question 15

Cardinal Company incurs $800,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours.Assuming Cardinal claims the credit for employer-provided child care this year,its basis in the newly constructed facility is $640,000.

Accepted Answer

The answer of Cardinal Company incurs $800,000 during the year...

Question 16

A taxpayer who expenses circulation expenditures in the year incurred for regular income tax purposes will have a positive AMT adjustment in the following year.

Accepted Answer

Circulation expenditures are not deductible for AMT purposes, so there would be no AMT adjustment in the following year.

Question 17

In computing the foreign tax credit,the greater of the foreign income taxes paid or the overall limitation is allowed.

Accepted Answer

The foreign tax credit is limited to the lower of the foreign income taxes paid or the overall limitation, which is calculated based on the taxpayer's U.S. tax liability on their foreign taxable income.

Question 18

Joel placed real property in service in 2013 that cost $900,000 and used MACRS for regular income tax purposes.He is required to make a positive adjustment for AMT purposes in 2013 for the excess of depreciation calculated for regular income tax purposes over the depreciation calculated for AMT purposes.

Accepted Answer

The answer of Joel placed real property in service in...

Question 19

After personal property is fully depreciated for both regular income tax purposes and AMT purposes,the positive and negative adjustments that have been made for AMT purposes will net to zero.

Accepted Answer

Once personal property is fully depreciated for both regular income tax and AMT purposes, the positive and negative adjustments made for AMT purposes will cancel each other out, resulting in a net zero adjustment.

Question 20

Interest income on private activity bonds issued before 2009 and after 2010,reduced by expenses incurred in carrying the bonds,is a tax preference item that is included in computing AMTI.

Accepted Answer

Interest income on private activity bonds issued before 2009 and after 2010, reduced by expenses incurred in carrying the bonds, is a tax preference item that is added back to taxable income when computing alternative minimum taxable income (AMTI). This means that it is included in the calculation of AMTI, which can result in a higher tax liability for some taxpayers.

Quiz 14: Business Tax Credits and Corporate Alternative Minimum Tax