Question 1

In computing AMTI,tax preference items are

Accepted Answer

B) All tax preferences are added to compute the tax base for AMT.

Question 2

For purposes of the AMT,the standard deduction,but not the personal and dependency exemptions,is allowed.

Accepted Answer

Neither the standard deduction nor personal and dependency exemptions are allowed for AMT.

Question 3

A taxpayer acquired new equipment to be used in her business this year.For AMT purposes,depreciation must be recalculated using the straight-line method over the same recovery period used for regular tax purposes.

Accepted Answer

Depreciation must be recalculated using the 150% declining balance method.

Question 4

Jake and Christina are married and file a joint return for 2017 with taxable income of $100,000 and tax preferences and adjustments of $20,000 for AMT purposes.Their regular tax liability is $16,478.What is the amount of their total tax liability?

Accepted Answer

C) The amount of AMTI is $120,000. Their AMT base $120,000 - $84,500 or $35,500. Their TMT is $35,500 × .26 = $9,230. Their tax liability is the greater of the TMT or regular tax, in this case, $16,478.

Question 5

In computing the alternative minimum taxable income,no deduction is allowed for

Accepted Answer

C) Personal and dependency exemptions are added back to taxable income to get alternative minimum taxable income.

Question 6

In 2017,Charlton and Cindy have alternative minimum taxable income of $130,000 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

Accepted Answer

D) The exemption for a married couple filing a joint return with AMTI of $160,900 or less is $84,500 in 2017.

Question 7

The itemized deduction phase-out,which has the effect of increasing regular taxable income for high income taxpayers,will also raise AMTI.

Accepted Answer

The AMT adjustment for itemized deductions ignores the regular tax provision limiting the deductible amount of itemized deductions for high-income taxpayers.

Question 8

In computing AMTI,adjustments are

Accepted Answer

D) While most adjustments increase the AMT tax base, the AMT tax base may be reduced when the timing differences reverse.

Question 9

Mortgage interest paid on a mortgage obtained to buy a principal residence,deductible for regular income tax purposes,is also an allowable deduction for AMT.

Accepted Answer

Interest on mortgage debt to acquire or improve a principal residence is qualified housing interest and therefore deductible for AMT.

Question 10

An example of an AMT tax preference item is the excess of MACRS depreciation on equipment over depreciation computed by using the the 150% declining balance method.

Accepted Answer

The AMT modification in the question is an adjustment, not a preference item.

Question 11

Casualty and theft losses in excess of 10% of AGI are deductible for AMT purposes.

Accepted Answer

The AMT provisions do not require an adjustment for casualty and theft losses.

Question 12

A taxpayer acquired an office building to be used in her business this year.For AMT purposes,depreciation must be recalculated using the straight-line method over 40 years.

Accepted Answer

There is no AMT depreciation adjustment for real property placed in service after December 31, 1998.

Question 13

Mr.and Mrs.Lewis have an alternative minimum tax base of $312,000.Their tentative minimum tax will be

Accepted Answer

D) Their AMT base exceeds the 26% threshold of $187,800 so the excess will be taxed at 28%. (($312,000 - 187,800) × .28) + ($187,800 × .26) = $83,604

Question 14

For purposes of the AMT,only the foreign tax credit and refundable personal credits are allowed to reduce the tentative minimum tax.

Accepted Answer

The foreign tax credit and nonrefundable personal credits reduce the tentative minimum tax.

Question 15

The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability.

Accepted Answer

The AMT serves as a tax floor so it will only be paid if it exceeds the regular tax.

Question 16

All tax-exempt bond interest income is classified as an AMT preference.

Accepted Answer

Interest on private activity municipal bond interest is an AMT preference item, but interest income from general purpose bonds is not a preference item.

Question 17

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her

Accepted Answer

B) The tentative minimum tax is computed by multiplying the alternative minimum tax base (AMTI less the exemption) times the tax rate.

Question 18

A taxpayer who paid AMT in prior years,but is not subject to the AMT in the current year,may be entitled to an AMT credit against his regular tax liability in the current year.

Accepted Answer

To the extent that AMT is due to temporary differences, a minimum tax credit carryover is generated for use in a future, non-AMT year.

Question 19

Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2017 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

Accepted Answer

A)
 11ea7e84_1f3d_86b6_9a0a_8b552591ea8b_TB1260_00

Question 20

Drake and Davina are married and file a joint return for 2017 with taxable income of $100,000 and tax preferences and adjustments of $51,000 for AMT purposes.Their regular tax liability is $16,478.What is the amount of their total tax liability?

Accepted Answer

A) The amount of AMTI is $151,000. Their AMT base $151,000 - $84,500 or $66,500. Their TMT is $66,500 × .26 = $17,290. Their tax liability is the greater of the TMT or regular tax, in this case, $17,290.

Quiz 14: Special Tax Computation Methods, tax Credits, and Payment of Tax