Omar acquires used 7-year personal property for $100,000 to use in his business in February 2012.Omar does not elect § 179 expensing, but does take the maximum regular cost recovery deduction.He elects not to take additional first-year depreciation.As a result, Omar will have a positive AMT adjustment in 2012 of what amount?
A)$0.
B)$3,580.
C)$10,710.
D)$14,290.
E)None of the above.

Question

Quizplus · Accepted Answer

Since Omar did not elect § 179 expensing and did not take additional first-year depreciation, his regular cost recovery deduction will be $14,290 (assuming straight-line depreciation over 7 years).

To calculate the AMT adjustment, we need to compare the regular tax and AMT depreciation amounts. For AMT purposes, the personal property is classified as 7-year property and has a 150% declining balance method, resulting in a 10.5% depreciation rate. Therefore, the AMT depreciation deduction for 2012 will be $10,710 ($100,000 x 10.5%).

The AMT adjustment is the difference between the regular tax and AMT depreciation deductions. In this case, the AMT adjustment is $3,580 ($14,290 - $10,710).

Therefore, the answer is B) $3,580.

Omar Acquires Used 7-Year Personal Property for $100,000 to Use