In the current year,FurnitureKing Corporation recognized $32,000 of income from an installment sale it made in a previous tax year.If installment sales are the only difference between ACE and alternative minimum taxable income (before the ACE adjustment),what is the amount and nature of the ACE adjustment for the current tax year?
A) $24,000 favorable.
B) $24,000 unfavorable.
C) $32,000 favorable.
D) $32,000 unfavorable.

Question

Quizplus · Accepted Answer

The ACE adjustment is the difference between ACE and AMTI. Since $32,000 was recognized in the current year, and only 75% of the difference is considered for ACE, the adjustment is $32,000 * 75% = $24,000. Since this increases AMTI, it is a favorable adjustment.

In the Current Year,FurnitureKing Corporation Recognized $32,000 of Income from an Installment