Question 1

Will all AMT adjustments reverse? That is,do they relate to timing differences?

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Question 2

In calculating her 2016 taxable income,Rhonda,who is age 45,claims the following itemized deductions.
Medical expenses [$6,500 - 10%($60,000)]
$ 500
State income taxes
2,500
Property taxes
3,000
Home mortgage interest on principal residence
5,000
Charitable contributions
3,500
Miscellaneous itemized deductions [$2,000 - 2%($60,000)]
800
Total itemized deductions for regular income tax
$15,300
​
Calculate Rhonda's AMT adjustment for itemized deductions.

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Question 3

In calculating the AMT using the indirect method,do AMT adjustments and AMT preferences increase or decrease AMTI?

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Question 4

Beige,Inc. ,records AMTI of $200,000.Calculate the amount of the AMT exemption if:
a.Beige is a small corporation for AMT purposes.
b.Beige is not a small corporation for AMT purposes.

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The answer of Beige,Inc. ,records AMTI of $200,000.Calculate the amount...

Question 5

Gunter,who is divorced,reports the following items for 2016.
Salary
$60,000
Gain on sale of land held nine months
(regular income tax basis is $4,000 less than AMT basis)
10,000
Traditional IRA contribution
5,000
Alimony paid
9,000
Itemized deductions:
Charitable contributions
$3,000
Home mortgage interest on his principal residence
4,000
State income taxes
2,000
9,000
Private activity municipal bond interest
15,000
​
Calculate Gunter's AMTI for 2016.

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The answer of Gunter,who is divorced,reports the following items for...

Question 6

Crimson,Inc. ,provides you with the following information.
Regular corporate tax liability
$ 22,250
AMT adjustments and preferences (excluding ACE adjustment)
80,000
ACE adjustment
11,000
Taxable income
100,000
​
Calculate Crimson's AMT for 2016.

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The answer of Crimson,Inc. ,provides you with the following information.
Regular...

Question 7

In June,Della purchases a building for $800,000 to use in her business as an office building.Della uses the depreciation method which will provide her with the greatest deduction for regular income tax purposes.
​
a.Calculate the AMT adjustment for depreciation in 2016 if Della purchased the building in 2016.
b.Calculate the AMT preference for depreciation in 2016 if Della purchased the building in 1986.

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The answer of In June,Della purchases a building for $800,000...

Question 8

Lavender,Inc. ,incurs research and experimental expenditures of $210,000 in 2016.Determine the amount of the AMT adjustment for 2016 and for 2017 if for regular income tax purposes:
​
​
a.Lavender fully deducts the research and experimental expenses.
b.Lavender capitalizes the research and experimental expenses and elects to amortize them over a 10-year period.

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Question 9

What is the relationship between taxable income and AMTI?

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Question 10

What is the relationship between the regular income tax liability and the TMT?

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Question 11

Darin's,who is age 30,records itemized deductions in calculating 2016 taxable income as follows.
Medical expenses [$15,000 - 10%($100,000)]
$ 5,000
Mortgage interest on personal residence
7,000
State income taxes
4,000
Real property taxes
4,500
Personal property taxes
2,500
Casualty loss [$14,000 (after $100 floor)- (10% × $100,000)]
4,000
Charitable contributions
3,500
Gambling losses ($3,200 limited to gambling income of $1,000)
1,000
Miscellaneous itemized deductions [$2,500 - 2%($100,000)]
500
Itemized deductions
$32,000
​
a.Calculate Darin's itemized deductions for AMT purposes using the direct method.
b.Calculate Darin's itemized deductions for AMT purposes using the indirect method.

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Question 12

Why is there a need for a second tax system called the alternative minimum tax?

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Question 13

Lilly is single and reports zero taxable income for 2016.She has positive AMT timing adjustments of $600,000 and AMT exclusions of $200,000.
​
a.Calculate Lilly's tentative minimum tax.
b.Calculate Lilly's AMT credit carryover to 2017.

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The answer of Lilly is single and reports zero taxable...

Question 14

Sage,Inc. ,has the following gross receipts and taxable income,since its incorporation in 2010.
Gross receipts
Taxable income
2010
$4,600,000
$120,000
2011
4,300,000
190,000
2012
7,200,000
162,000
2013
9,000,000
180,000
2014
6,200,000
150,000
2015
6,500,000
160,000
2016
6,800,000
162,000
Is Sage,Inc. ,subject to the AMT in 2016?

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The answer of Sage,Inc. ,has the following gross receipts and...

Question 15

Frederick sells land and building whose adjusted basis for regular income tax purposes is $345,000 and for AMT purposes is $380,000.The sales proceeds are $850,000.Determine the effect on:
​
a.Taxable income.
b.AMTI.

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The answer of Frederick sells land and building whose adjusted...

Question 16

Melinda is in the 35% marginal regular tax bracket.She reports a net capital gain of $150,000 on the sale of land which is eligible for the lower tax on net capital gain in calculating the regular income tax.Discuss the tax rate that applies to the $150,000 net capital gain in calculating the tentative AMT for Melinda.

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Question 17

What is the purpose of the AMT exemption amount? What is the maximum amount for each filing status for an individual taxpayer and for a corporate taxpayer?

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Question 18

In May 2013,Swallow,Inc. ,issues options to Karrie,a corporate officer,to purchase 100 shares of Swallow stock under an ISO plan.At the date the stock options are issued,the fair market value of the stock is $1,000 per share and the option price is $1,200 per share.The stock becomes freely transferable in 2014.Karrie exercises the options in November 2013 when the stock is selling for $1,500 per share.She sells the stock in December 2015 for $1,800 per share.
​
a.Determine the amount of the AMT adjustment for 2013.
b.Determine the amount of the AMT adjustment for 2014.
c.Determine Karrie's recognized gain for regular income tax purposes and for AMT purposes in 2015 on the sale of the stock.
d.Determine the amount of the AMT adjustment for 2015.

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Question 19

Cindy,who is single and age 68,has no dependents and has adjusted gross income of $50,000 in 2016.Her potential itemized deductions are as follows.
​
Medical expenses (before percentage limitation)
$10,000
State income taxes
2,500
Real estate taxes
4,000
Mortgage (qualified housing and residence)interest
5,500
Unreimbursed employee expenses (before percentage limitation)
2,600
​
What are Cindy's AMT adjustments for itemized deductions for 2016?

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The answer of Cindy,who is single and age 68,has no...

Question 20

Abbygail,who is single,reported taxable income of $115,000 for 2016.She incurred positive AMT adjustments of $30,000,negative AMT adjustments of $12,000,and tax preference items of $50,000.Abbygail itemizes deductions.
​
a.Compute her AMTI.
a.Compute Abbygail's tentative minimum tax.
b.Assume the same facts as in part

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The answer of Abbygail,who is single,reported taxable income of $115,000...

Quiz 12: Alternative Minimum Tax

Will all AMT adjustments reverse? That is,do they relate to timing differences?

In calculating the AMT using the indirect method,do AMT adjustments and AMT preferences increase or decrease AMTI?

Beige,Inc. ,records AMTI of $200,000.Calculate the amount of the AMT exemption if: a.Beige is a small corporation for AMT purposes. b.Beige is not a small corporation for AMT purposes.

Crimson,Inc. ,provides you with the following information. Regular corporate tax liability $ 22,250 AMT adjustments and preferences (excluding ACE adjustment) 80,000 ACE adjustment 11,000 Taxable income 100,000 Calculate Crimson's AMT for 2016.

What is the relationship between taxable income and AMTI?

What is the relationship between the regular income tax liability and the TMT?

Why is there a need for a second tax system called the alternative minimum tax?

Lilly is single and reports zero taxable income for 2016.She has positive AMT timing adjustments of $600,000 and AMT exclusions of $200,000. a.Calculate Lilly's tentative minimum tax. b.Calculate Lilly's AMT credit carryover to 2017.

Frederick sells land and building whose adjusted basis for regular income tax purposes is $345,000 and for AMT purposes is $380,000.The sales proceeds are $850,000.Determine the effect on: a.Taxable income. b.AMTI.

What is the purpose of the AMT exemption amount? What is the maximum amount for each filing status for an individual taxpayer and for a corporate taxpayer?

Quiz 12: Alternative Minimum Tax

Will all AMT adjustments reverse? That is,do they relate to timing differences?

In calculating the AMT using the indirect method,do AMT adjustments and AMT preferences increase or decrease AMTI?

Beige,Inc. ,records AMTI of $200,000.Calculate the amount of the AMT exemption if: a.Beige is a small corporation for AMT purposes. b.Beige is not a small corporation for AMT purposes.

Crimson,Inc. ,provides you with the following information. Regular corporate tax liability $ 22,250 AMT adjustments and preferences (excluding ACE adjustment) 80,000 ACE adjustment 11,000 Taxable income 100,000 ​ Calculate Crimson's AMT for 2016.

What is the relationship between taxable income and AMTI?

What is the relationship between the regular income tax liability and the TMT?

Why is there a need for a second tax system called the alternative minimum tax?

Lilly is single and reports zero taxable income for 2016.She has positive AMT timing adjustments of $600,000 and AMT exclusions of $200,000. ​ a.Calculate Lilly's tentative minimum tax. b.Calculate Lilly's AMT credit carryover to 2017.

Frederick sells land and building whose adjusted basis for regular income tax purposes is $345,000 and for AMT purposes is $380,000.The sales proceeds are $850,000.Determine the effect on: ​ a.Taxable income. b.AMTI.

What is the purpose of the AMT exemption amount? What is the maximum amount for each filing status for an individual taxpayer and for a corporate taxpayer?

Crimson,Inc. ,provides you with the following information. Regular corporate tax liability $ 22,250 AMT adjustments and preferences (excluding ACE adjustment) 80,000 ACE adjustment 11,000 Taxable income 100,000 Calculate Crimson's AMT for 2016.

Lilly is single and reports zero taxable income for 2016.She has positive AMT timing adjustments of $600,000 and AMT exclusions of $200,000. a.Calculate Lilly's tentative minimum tax. b.Calculate Lilly's AMT credit carryover to 2017.

Frederick sells land and building whose adjusted basis for regular income tax purposes is $345,000 and for AMT purposes is $380,000.The sales proceeds are $850,000.Determine the effect on: a.Taxable income. b.AMTI.