Tanver Corporation, a calendar year corporation, has alternative minimum taxable income of $7 million in 2017 (before adjustment for adjusted current earnings).If Tanver's adjusted current earnings is $16 million, its tentative minimum tax for 2017 is:

Question

Quizplus · Accepted Answer

Tentative minimum tax for 2017 can be calculated as follows:
10% * ($7 million - $40,000) + 15% * ($16 million - $7 million) = $700,000 + $1,350,000 = $2,050,000
However, the tentative minimum tax cannot be less than 20% of the excess of alternative minimum taxable income over $2 million. In this case, the excess is $5 million ($7 million - $2 million), so the minimum tax under this rule is $1 million (20% * $5 million). Therefore, the tentative minimum tax for Tanver Corporation in 2017 is $2,750,000 (the higher of the two amounts calculated). Therefore, the best choice is B.

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