If the taxpayer elects to capitalize intangible drilling costs and to amortize them over a 3-year period for regular income tax purposes,there is no adjustment or preference for AMT purposes.

Question

Quizplus · Accepted Answer

Electing to capitalize intangible drilling costs and amortize them over a 3-year period for regular income tax purposes creates a preference item for AMT purposes. This is because the AMT requires taxpayers to capitalize and amortize intangible drilling costs over a longer period of time than the regular tax rules. Therefore, an adjustment to the preference item is required for AMT purposes.

If the Taxpayer Elects to Capitalize Intangible Drilling Costs and to Amortize