Joshua purchased business furniture and fixtures (7-year property)for $40,000 in May 2011.On July 15,2014,Joshua sold the furniture and fixtures for $30,000.During his years of ownership,he had taken $27,504 of depreciation for regular tax purposes.AMT depreciation for that period was $17,276.What is the 2014 AMT adjustment required as a result of the sale of the assets?

Question

Quizplus · Accepted Answer

The adjusted basis of the property for AMT purposes is the original cost minus the AMT depreciation taken over the years. 
Adjusted basis = $40,000 - $17,276 = $22,724. 
The gain or loss from the sale is calculated by subtracting the adjusted basis from the sales price. 
Gain = $30,000 - $22,724 = $7,276. 
Since the asset was held for more than one year, this is a long-term capital gain. 
For AMT purposes, the gain is included in alternative minimum taxable income and is subject to a flat tax rate of 28%. 
Therefore, the AMT adjustment required is $7,276 x 28% = $10,228.

Joshua Purchased Business Furniture and Fixtures (7-Year Property)for $40,000 in May