Lavonne has a regular tax liability of $13,356 on taxable income of $70,000. She also has tax preferences of $25,000 and positive adjustments attributable to limitations on itemized deductions of $15,000.Lavonne is single and takes a $3,950 personal exemption for herself only. Lavonne's alternative minimum tax for 2014 is
A)$0.
B)$2,543.
C)$16,271.
D)none of the above.

Question

Quizplus · Accepted Answer

The correct answer is B because the alternative minimum tax is calculated as the excess of the tentative minimum tax over the regular tax. The tentative minimum tax is calculated as the sum of the alternative minimum taxable income multiplied by the alternative minimum tax rate, plus the alternative minimum tax foreign tax credit. The alternative minimum taxable income is calculated as the taxable income plus the alternative minimum tax preferences, minus the alternative minimum tax adjustments. The alternative minimum tax rate is 26% for taxable income over $175,000 for single filers. The alternative minimum tax foreign tax credit is the amount of foreign taxes paid that is not allowed as a deduction for regular tax purposes. In this case, Lavonne's alternative minimum taxable income is $70,000 + $25,000 - $15,000 = $80,000. Her tentative minimum tax is $80,000 x 0.26 = $20,800. Her regular tax is $13,356. Therefore, her alternative minimum tax is $20,800 - $13,356 = $2,543.

Lavonne Has a Regular Tax Liability of $13,356 on Taxable