Question 1

In 2012, Louise incurs circulation expenses of $330,000 which she deducts in calculating taxable income.

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Question 2

Mauve, Inc., has the following for 2011, 2012, and 2013 and no prior ACE adjustments.

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Question 3

Luke's itemized deductions in calculating taxable income are as follows:

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Question 4

Which of the following statements is correct?

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A C corporation classified as a small corporation is not subject to the Alternative Minimum Tax (AMT).

Question 5

Cindy, who is single and has no dependents, has adjusted gross income of $50,000 in 2012.Her potential itemized deductions are as follows:
  What is the amount of Cindy's AMT adjustment for itemized deductions for 2012?

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Question 6

Use the following selected data to calculate Devon's taxable income.

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Question 7

In calculating her taxable income, Rhonda deducts the following itemized deductions.
  Calculate Rhonda's AMT adjustment for itemized deductions.

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Question 8

Sand Corporation, a calendar year taxpayer, has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE)] of $750,000 for 2012.If Sand's (ACE) is $975,000, its tentative minimum tax for 2012 is:

Accepted Answer

The tentative minimum tax is calculated by taking the alternative minimum taxable income and adding 75% of the excess of ACE over the alternative minimum taxable income. Here, the excess is $225,000 ($975,000 - $750,000). 75% of $225,000 is $168,750. Adding this to the original $750,000 gives $918,750. The tentative minimum tax is 20% of this amount, which is $183,750.

Question 9

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:

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Question 10

Use the following data to calculate Diane's AMTI.

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Question 11

Tad and Audria, who are married filing a joint return, have AMTI of $256,000 for 2012. Calculate their AMT exemption.

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Question 12

In September, Dorothy purchases a building for $900,000 to use in her business as a warehouse.Dorothy uses the depreciation method which will provide her with the greatest deduction for regular income tax purposes.

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Question 13

Bianca and Barney have the following for 2012:

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Question 14

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

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Question 15

In May 2011, Egret, Inc.issues options to Andrea, a corporate officer, to purchase 200 shares of Egret stock under an ISO plan.At the date the stock options are issued, the fair market value of the stock is $900 per share and the option price is $1,200 per share.The stock becomes freely transferable in 2012.Andrea exercises the options in November 2011 when the stock is selling for $1,600 per share.She sells the stock in December 2013 for $1,800 per share.

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Question 16

Smoke, Inc., provides you with the following information:
  Calculate Smoke's AMT for 2012.

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Question 17

Sage, Inc., has the following gross receipts and taxable income:
  Is Sage, Inc., subject to the AMT in 2012?

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Question 18

Kay, who is single, had taxable income of $0 in 2012.She has positive timing adjustments of $206,300 and exclusion items of $100,000 for the year.What is the amount of her alternative minimum tax credit for carryover to 2013?

Accepted Answer

First, we need to calculate Kay's alternative minimum taxable income (AMTI). To do so, we add back the timing adjustments and exclusion items to her taxable income: 
$0 (taxable income) + $206,300 (timing adjustments) + $100,000 (exclusion items) = $306,300 (AMTI)

Next, we need to calculate her tentative minimum tax (TMT), which is calculated using a flat rate of 26% on the first $175,000 of AMTI and 28% on any amount over $175,000:
($175,000 x 0.26) + ($131,300 x 0.28) = $47,500

Since Kay's regular tax liability is $0, her alternative minimum tax (AMT) is $47,500. However, since she had no tax liability to offset the AMT in 2012, she can carryover the full amount of the AMT as a credit to offset her tax liability in future years.

Therefore, the amount of Kay's AMT credit for carryover to 2013 is $47,500, which is equivalent to choice B ($68,861 is the amount of AMTI at which the AMT credit starts to phase out for single taxpayers in 2012, but since Kay had no tax liability, this phase-out does not apply in her case).

Question 19

Lavender, Inc., incurs research and experimental expenditures of $210,000 in 2012.Determine the amount of the AMT adjustment for 2012 and for 2013 if for regular income tax purposes:

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Question 20

Sand, Inc., has AMTI of $200,000. Calculate the amount of the AMT exemption if:

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Quiz 15: Alternative Minimum Tax