Ortiz Corporation determined its AMTI to be $120,000 for 2014. If the regular income tax liability is $15,000, what is the amount of the alternative minimum tax for 2014?
A) $- 0 -
B) $1,000
C) $9,000
D) $16,000
E) $24,000

Question

Quizplus · Accepted Answer

The alternative minimum tax (AMT) is a parallel tax system that ensures that taxpayers with substantial economic income pay a minimum amount of tax. The AMT is calculated by making certain adjustments to the regular taxable income and applying a different set of tax rates. In this case, the Ortiz Corporation's AMTI is $120,000, which is higher than its regular taxable income. As a result, the Ortiz Corporation will be subject to the AMT. The AMT is calculated by applying a 20% tax rate to the AMTI, which results in an AMT of $24,000. However, the Ortiz Corporation's regular income tax liability is only $15,000. As a result, the Ortiz Corporation will only have to pay the AMT in the amount of $9,000 ($24,000 - $15,000).

Ortiz Corporation Determined Its AMTI to Be $120,000 for 2014