Saffron Corporation, a calendar year taxpayer, has alternative minimum taxable income (before adjustment for adjusted current earnings) of $2 million for 2016. If Saffron Corporation's adjusted current earnings is $4 million, its tentative minimum tax for 2016 is:

Question

​Saffron Corporation, a calendar year taxpayer, has alternative minimum taxable income (before adjustment for adjusted current earnings) of $2 million for 2016. If Saffron Corporation's adjusted current earnings is $4 million, its tentative minimum tax for 2016 is:

Quizplus · Accepted Answer

The tentative minimum tax is calculated as 20% of the alternative minimum taxable income (AMTI) adjusted for adjusted current earnings (ACE). The ACE adjustment is the excess of ACE over AMTI, which is $2 million ($4 million - $2 million). The AMTI after ACE adjustment is $4 million, and 20% of $4 million is $800,000. However, the question asks for the tentative minimum tax before any credits, which is 20% of the AMTI before ACE adjustment, i.e., 20% of $2 million, which is $400,000. Therefore, the correct answer is $700,000, which is 20% of the AMTI after ACE adjustment.

​Saffron Corporation, a Calendar Year Taxpayer, Has Alternative Minimum Taxable

Saffron Corporation, a Calendar Year Taxpayer, Has Alternative Minimum Taxable