Saffron Corporation, a calendar year taxpayer, has alternative minimum taxable income (before adjustment for adjusted current earnings) of $2 million for 2017. If Saffron Corporation's adjusted current earnings is $4 million, its tentative minimum tax for 2017 is:

Question

​Saffron Corporation, a calendar year taxpayer, has alternative minimum taxable income (before adjustment for adjusted current earnings) of $2 million for 2017. If Saffron Corporation's adjusted current earnings is $4 million, its tentative minimum tax for 2017 is:

Quizplus · Accepted Answer

The tentative minimum tax is calculated as 20% of the adjusted current earnings (ACE) if it exceeds the alternative minimum taxable income (AMTI). Here, 20% of $4 million (ACE) is $800,000, but since the AMTI is $2 million, the tax is 20% of $2 million, which is $400,000. However, the question asks for the tentative minimum tax, which is the higher of the two calculations, so it is $700,000 (20% of $3.5 million, which is the excess of ACE over AMTI).

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

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