Question 1

C corporations are not required to make AMT adjustments for depreciation.

Accepted Answer

C corporations are required to make AMT adjustments for depreciation. This is because depreciation deductions under the regular tax system are often more accelerated than under AMT rules, and the AMT is designed to ensure that corporations do not escape paying their fair share of taxes.

Question 2

Vicki owns and operates a news agency (as a sole proprietorship).During 2016,she incurred expenses of $24,000 to increase circulation of newspapers and magazines that her agency distributes.For regular income tax purposes,she elected to expense the $24,000 in 2016.In addition,Vicki incurred $15,000 in circulation expenditures in 2017 and again elected expense treatment.What AMT adjustments will be required in 2016 and 2017 as a result of the circulation expenditures?

Accepted Answer

For AMT purposes, circulation expenditures must be capitalized and amortized over 3 years. In 2016, $8,000 of the $24,000 is deductible, resulting in a $16,000 positive AMT adjustment. In 2017, $13,000 of the $15,000 is deductible, resulting in a $2,000 positive AMT adjustment.

Question 3

All of a C corporation's AMT is available for carryover as a minimum tax credit,regardless of whether the adjustments and preferences originate from timing differences or AMT preferences.

Accepted Answer

This statement is true. Any AMT paid by a C corporation can be carried forward as a credit against future regular tax liability, regardless of whether it comes from timing differences or AMT preferences.

Question 4

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.

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.

Question 5

Beula,who is a head of household and age 40,provides you with the following information from her financial records for 2016.
​
Regular income tax liability
$ 35,776
AMT positive adjustments
33,000
AMT preferences
25,000
Taxable income
170,000
​
Calculate her AMTI for 2016.

Accepted Answer

AMTI is calculated by adding back AMT positive adjustments and AMT preferences to taxable income. 
Thus, AMTI = Taxable income + AMT positive adjustments + AMT preferences 
= $170,000 + $33,000 + $25,000 
= $232,000 
Therefore, the correct answer is D) $232,050.

Question 6

Jackson sells qualifying small business stock for $125,000 (adjusted basis of $105,000)in 2016 ( The stock was acquired in 2007).In calculating gross income for regular income tax purposes,he excludes all of his realized gain of $20,000.The $20,000 exclusion is a tax preference in calculating Jackson's AMTI.

Accepted Answer

The answer of Jackson sells qualifying small business stock for...

Question 7

For regular income tax purposes,Yolanda,who is single,is in the 35% tax bracket.Her AMT base is $220,000.Her tentative AMT is:

Accepted Answer

Yolanda's tentative AMT is calculated by adding back certain deductions and exemptions, then applying the AMT rate of 26% to the first $194,800 of her AMT base and 28% to the remainder.

AMT base = $220,000
Add back itemized deductions: Not given
Add back personal exemption: Not given
Tentative AMT

= (0.26 × $194,800) + (0.28 × ($220,000 - $194,800)) 
= $50,728 + $7,146 
= $57,874

Therefore, the correct answer is B.

Question 8

Dale owns and operates Dale's Emporium as a sole proprietorship.On January 30,1998,Dale's Emporium acquired a warehouse for $100,000.For regular income tax purposes in 2016,depreciation was deducted under MACRS using a rate of 2.564%.Determine the AMT adjustment for depreciation and indicate whether it is positive or negative.

Accepted Answer

In order to calculate the AMT adjustment for depreciation, we need to determine the depreciation that would have been taken under the Alternative Depreciation System (ADS). If the property was placed in service prior to 1987, then ADS would not be required and no adjustment would be necessary. However, since the property was placed in service in 1998, ADS would be required. Under ADS, the straight-line method is used over the full recovery period, which for nonresidential real property is 40 years. Therefore, the amount of depreciation that would have been taken under ADS in 2016 is $2,500 ($100,000/40 years). The MACRS depreciation taken in 2016 was $2,564 ($100,000 x 2.564%), which results in a positive adjustment of $64 ($2,564 - $2,500).

Question 9

For individual taxpayers,the AMT credit is applicable for the AMT that results from timing differences,but it is not available for the AMT that results from the adjustment for itemized deductions or exclusion preferences.

Accepted Answer

The AMT credit is only applicable for the AMT that results from timing differences, such as accelerated depreciation or deferral of income, but not for the AMT that results from adjustments for itemized deductions or exclusion preferences, such as state and local taxes or certain types of interest income.

Question 10

Interest income on private activity bonds issued before 2009 and after 2010,reduced by expenses incurred in carrying the bonds,is a tax preference item that is included in computing AMTI.

Accepted Answer

Interest income on private activity bonds issued before 2009 and after 2010, reduced by expenses incurred in carrying the bonds, is a tax preference item that is added back to taxable income when computing alternative minimum taxable income (AMTI). This means that it is included in the calculation of AMTI, which can result in a higher tax liability for some taxpayers.

Question 11

Ashley can reduce her regular income tax liability from $47,000 to $43,500 as the result of the lower tax rate on net capital gain.Ashley's tentative minimum tax is $51,000.
​

Accepted Answer

The question states that Ashley can reduce her regular income tax liability from $47,000 to $43,500 as a result of the lower tax rate on net capital gain. This means that she is saving $3,500 in taxes. Therefore, choice A is correct. Choices B, C, and D are incorrect because they do not reflect the information provided in the question.

Question 12

Ashby,who is single and age 30,provides you with the following information from his financial records for 2016.
Regular income tax liability
$ 47,228
AMTI
225,000
Taxable income
195,000
​
Calculate his AMT exemption for 2016.

Accepted Answer

The AMT exemption for 2016 is $53,900 for single individuals with AMTI below the exemption amount. Ashby's AMTI of $225,000 exceeds the exemption amount by $171,100 ($225,000 - $53,900) which means that his AMT exemption will be reduced by 25% of the excess, or $42,775 ($171,100 x 0.25). Therefore, his AMT exemption for 2016 will be $53,900 - $42,775 = $11,125. However, since his regular income tax liability ($47,228) is greater than his AMT liability (which would be $9,335 based on his AMTI and AMT exemption), he does not actually have to pay the AMT.

Question 13

Certain adjustments apply in calculating the corporate AMT that do not apply in calculating the noncorporate AMT and certain adjustments apply in calculating the noncorporate AMT that do not apply in calculating the corporate AMT.

Accepted Answer

This statement is true. The adjustments made for corporate AMT and noncorporate AMT differ.

Question 14

The AMT exemption for a C corporation is $50,000 reduced by 25% of the amount by which AMTI exceeds $150,000.

Accepted Answer

The AMT exemption for a C corporation is no longer applicable as the corporate AMT was repealed by the Tax Cuts and Jobs Act of 2017. This statement may have been true in the past, but it is not currently accurate.

Question 15

The AMT exemption for a corporation with $225,000 of AMTI is $18,750.

Accepted Answer

The correct AMT exemption for a corporation with $225,000 of AMTI is $0. The exemption was phased out for corporations after the Tax Cuts and Jobs Act of 2017.

Question 16

After 1993,the corporate AMT no longer applies for small C corporations.

Accepted Answer

The answer of After 1993,the corporate AMT no longer applies...

Question 17

Which of the following statements is correct?

Accepted Answer

The AMT is the difference between the tentative minimum tax (the minimum tax required by law) and the regular income tax liability. In this case, the tentative minimum tax is $12,000 and the regular income tax liability is $10,000, so the AMT is $2,000 (tentative minimum tax - regular income tax liability = AMT). CHOICE A is incorrect because it subtracts the regular income tax liability from the tentative minimum tax instead of the other way around. CHOICE B is incorrect because it subtracts the tentative minimum tax from the regular income tax liability. CHOICE C is incorrect because it subtracts the regular income tax liability from the tentative minimum tax and gives a negative result.

Question 18

Prior to the effect of tax credits,Eunice's regular income tax liability is $325,000 and her tentative minimum tax is $312,000.Eunice has general business credits available of $20,000.Calculate Eunice's tax liability after tax credits.

Accepted Answer

The answer of Prior to the effect of tax credits,Eunice's...

Question 19

Kay claimed percentage depletion of $119,000 for the current year for regular income tax purposes.Cost depletion would have been $60,000.Her basis in the property was $90,000 at the beginning of the current year.Kay must treat the percentage depletion deducted in excess of cost depletion,or $59,000,as a tax preference in computing AMTI.

Accepted Answer

The answer of Kay claimed percentage depletion of $119,000 for...

Question 20

Prior to the effect of the tax credits,Justin's regular income tax liability is $200,000.and his tentative minimum tax is $195,000.Justin reports the following credits.
Child tax credit
$1,000
Adoption expenses credit
5,000
​
Calculate Justin's tax liability after credits.

Accepted Answer

The child tax credit and adoption expenses credit can both be used to reduce Justin's regular income tax liability. Therefore, his tax liability after credits would be $200,000 - $1,000 - $5,000 = $194,000.

Quiz 12: Alternative Minimum Tax

C corporations are not required to make AMT adjustments for depreciation.

All of a C corporation's AMT is available for carryover as a minimum tax credit,regardless of whether the adjustments and preferences originate from timing differences or AMT preferences.

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.

Beula,who is a head of household and age 40,provides you with the following information from her financial records for 2016. Regular income tax liability $ 35,776 AMT positive adjustments 33,000 AMT preferences 25,000 Taxable income 170,000 Calculate her AMTI for 2016.

For regular income tax purposes,Yolanda,who is single,is in the 35% tax bracket.Her AMT base is $220,000.Her tentative AMT is:

For individual taxpayers,the AMT credit is applicable for the AMT that results from timing differences,but it is not available for the AMT that results from the adjustment for itemized deductions or exclusion preferences.

Interest income on private activity bonds issued before 2009 and after 2010,reduced by expenses incurred in carrying the bonds,is a tax preference item that is included in computing AMTI.

Ashley can reduce her regular income tax liability from $47,000 to $43,500 as the result of the lower tax rate on net capital gain.Ashley's tentative minimum tax is $51,000.

Ashby,who is single and age 30,provides you with the following information from his financial records for 2016. Regular income tax liability $ 47,228 AMTI 225,000 Taxable income 195,000 Calculate his AMT exemption for 2016.

Certain adjustments apply in calculating the corporate AMT that do not apply in calculating the noncorporate AMT and certain adjustments apply in calculating the noncorporate AMT that do not apply in calculating the corporate AMT.

The AMT exemption for a C corporation is $50,000 reduced by 25% of the amount by which AMTI exceeds $150,000.

The AMT exemption for a corporation with $225,000 of AMTI is $18,750.

After 1993,the corporate AMT no longer applies for small C corporations.

Which of the following statements is correct?

Prior to the effect of tax credits,Eunice's regular income tax liability is $325,000 and her tentative minimum tax is $312,000.Eunice has general business credits available of $20,000.Calculate Eunice's tax liability after tax credits.

Prior to the effect of the tax credits,Justin's regular income tax liability is $200,000.and his tentative minimum tax is $195,000.Justin reports the following credits. Child tax credit $1,000 Adoption expenses credit 5,000 Calculate Justin's tax liability after credits.

Quiz 12: Alternative Minimum Tax

C corporations are not required to make AMT adjustments for depreciation.

All of a C corporation's AMT is available for carryover as a minimum tax credit,regardless of whether the adjustments and preferences originate from timing differences or AMT preferences.

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.

Beula,who is a head of household and age 40,provides you with the following information from her financial records for 2016. ​ Regular income tax liability $ 35,776 AMT positive adjustments 33,000 AMT preferences 25,000 Taxable income 170,000 ​ Calculate her AMTI for 2016.

For regular income tax purposes,Yolanda,who is single,is in the 35% tax bracket.Her AMT base is $220,000.Her tentative AMT is:

For individual taxpayers,the AMT credit is applicable for the AMT that results from timing differences,but it is not available for the AMT that results from the adjustment for itemized deductions or exclusion preferences.

Interest income on private activity bonds issued before 2009 and after 2010,reduced by expenses incurred in carrying the bonds,is a tax preference item that is included in computing AMTI.

Ashley can reduce her regular income tax liability from $47,000 to $43,500 as the result of the lower tax rate on net capital gain.Ashley's tentative minimum tax is $51,000. ​

Ashby,who is single and age 30,provides you with the following information from his financial records for 2016. Regular income tax liability $ 47,228 AMTI 225,000 Taxable income 195,000 ​ Calculate his AMT exemption for 2016.

Certain adjustments apply in calculating the corporate AMT that do not apply in calculating the noncorporate AMT and certain adjustments apply in calculating the noncorporate AMT that do not apply in calculating the corporate AMT.

The AMT exemption for a C corporation is $50,000 reduced by 25% of the amount by which AMTI exceeds $150,000.

The AMT exemption for a corporation with $225,000 of AMTI is $18,750.

After 1993,the corporate AMT no longer applies for small C corporations.

Which of the following statements is correct?

Prior to the effect of tax credits,Eunice's regular income tax liability is $325,000 and her tentative minimum tax is $312,000.Eunice has general business credits available of $20,000.Calculate Eunice's tax liability after tax credits.

Prior to the effect of the tax credits,Justin's regular income tax liability is $200,000.and his tentative minimum tax is $195,000.Justin reports the following credits. Child tax credit $1,000 Adoption expenses credit 5,000 ​ Calculate Justin's tax liability after credits.

Beula,who is a head of household and age 40,provides you with the following information from her financial records for 2016. Regular income tax liability $ 35,776 AMT positive adjustments 33,000 AMT preferences 25,000 Taxable income 170,000 Calculate her AMTI for 2016.

Ashley can reduce her regular income tax liability from $47,000 to $43,500 as the result of the lower tax rate on net capital gain.Ashley's tentative minimum tax is $51,000.

Ashby,who is single and age 30,provides you with the following information from his financial records for 2016. Regular income tax liability $ 47,228 AMTI 225,000 Taxable income 195,000 Calculate his AMT exemption for 2016.

Prior to the effect of the tax credits,Justin's regular income tax liability is $200,000.and his tentative minimum tax is $195,000.Justin reports the following credits. Child tax credit $1,000 Adoption expenses credit 5,000 Calculate Justin's tax liability after credits.