Z Corporation has AMTI of $250,000,which exceeds the AMT exemption phase-out threshold by $100,000.What is Z's tentative minimum tax?
A) $47,000.
B) $45,000.
C) $40,000.
D) $30,000.

Question

Quizplus · Accepted Answer

To calculate the tentative minimum tax, we need to start with the AMTI exceeding the exemption phase-out threshold, which is $100,000 in this case. We then multiply the excess by the AMT rate, which is 28% for corporations. Therefore, the tentative minimum tax for Z Corporation would be $28,000 ($100,000 x 28%). However, since this amount is less than the regular tax liability, which is calculated to be $197,000 ($700,000 taxable income x 28%), the tentative minimum tax would be the amount by which the AMT liability exceeds the regular tax liability. Therefore, the tentative minimum tax for Z Corporation would be $53,000 ($250,000 AMTI minus $197,000 regular tax liability) multiplied by the AMT rate of 28%, which equals $14,840. Finally, we add this amount to the AMT exemption amount of $40,000 to arrive at the tentative minimum tax of $54,840 ($14,840 + $40,000), which is closest to answer choice A ($47,000).

Z Corporation Has AMTI of $250,000,which Exceeds the AMT Exemption