Each of A, B, and C is each single, reports wage income of $435,000, and takes the standard deduction.The following additional information is provided about each taxpayer. A: Resides in New York and has $145,000 interest income from Treasury bonds.B: Resides in Nevada and has $145,000 capital gain from the sale of stock.
C: Resides in Florida and has $145,000 interest income from private-activity municipal bonds.
All else being equal and taking into consideration the principles underlying the AMT, which of these taxpayers has the highest likelihood of being subject to the AMT in the current tax year?
A)Taxpayer A.
B)Taxpayer B.
C)Taxpayer C.
D)All three taxpayers are equally likely to be in AMT.

Question

Quizplus · Accepted Answer

Taxpayer C is the most likely to be subject to the Alternative Minimum Tax (AMT) because their interest income is from private-activity municipal bonds. These bonds are a preference item for the AMT and increase the likelihood of triggering it. Taxpayer A's interest income is from Treasury bonds which are not a preference item and taxpayer B's capital gain is not a preference item either. Therefore, taxpayer C has the highest likelihood of being subject to the AMT.

Each of A, B, and C Is Each Single, Reports