Tanver Corporation, a calendar year corporation, has alternative minimum taxable income of $7 million in 2015 (before adjustment for adjusted current earnings). If Tanver's adjusted current earnings is $16 million, its tentative minimum tax for 2015 is:

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The tentative minimum tax for a corporation is calculated as 20% of the excess of alternative minimum taxable income over the exemption amount. For tax year 2015, the exemption amount for corporations is $40,000.

Therefore, the excess of Tanver's alternative minimum taxable income over the exemption amount is $6,960,000 ($7,000,000 - $40,000).

Next, the adjusted current earnings adjustment is made by subtracting 75% of adjusted current earnings over $40,000 from alternative minimum taxable income.

75% of adjusted current earnings over $40,000 is $9 million [75% x ($16 million - $40,000) = $11,970,000].

So, the adjusted alternative minimum taxable income is $7 million - $9 million = -$2 million.

Since the adjusted alternative minimum taxable income is negative, the tentative minimum tax is zero. However, there's a limit on the amount of unused minimum tax credit carryforward that a corporation may use. The limit is 50% of the unused minimum tax credit carryover from the prior year.

Assuming Tanver has a minimum tax credit carryforward of $5.5 million from the prior year, the maximum amount of credit that can be used is $2.75 million (50% x $5.5 million). Hence, the tentative minimum tax for 2015 is $2.75 million.

Tanver Corporation, a Calendar Year Corporation, Has Alternative Minimum Taxable