Loraine Manufacturing, Inc. reported the following for the current tax year: $$\begin{array} { l r }
\text { Regular taxable income } & \$ 95,000 \
\text { Regular tax liability } & 22,250 \
\text { Depreciation allowed under MACRS } & 25,000 \
\text { Depreciation allowed under ADS } & 38,000 \
\text { Excess percentage depletion deduction } & 40,000
\end{array}$$ What is Loraine Manufacturing's alternative minimum taxable income before any AMT exemption?

Question

Loraine Manufacturing, Inc. reported the following for the current tax year: $$\begin{array} { l r } 
\text { Regular taxable income } & \$ 95,000 \
\text { Regular tax liability } & 22,250 \
\text { Depreciation allowed under MACRS } & 25,000 \
\text { Depreciation allowed under ADS } & 38,000 \
\text { Excess percentage depletion deduction } & 40,000
\end{array}$$ What is Loraine Manufacturing's alternative minimum taxable income before any AMT exemption?

Quizplus · Accepted Answer

To calculate alternative minimum taxable income, we need to make adjustments to regular taxable income by adding back certain deductions and making certain other adjustments.

The adjustments are as follows:

- Add back depreciation that was allowed under MACRS but not under ADS: 25,000 - 38,000 = -13,000
- Add back excess percentage depletion deduction: 40,000
- Subtract the AMT exemption: not given in the question

Alternative minimum taxable income = regular taxable income + adjustments = 95,000 - 13,000 + 40,000 = 122,000

Therefore, the answer is C: $122,000.

Loraine Manufacturing, Inc What Is Loraine Manufacturing's Alternative Minimum Taxable Income Before Any