Question 1

Tad and Audria,who are married filing a joint return,have AMTI of $256,000 for 2014.Calculate their AMT exemption.

Accepted Answer

The answer of Tad and Audria,who are married filing a...

Question 2

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year.Cost depletion is $19,000.The property qualifies for a 15% depletion rate.Gross income from the property was $200,000 and net income before the percentage depletion deduction was $50,000.What is Eula's tax preference for excess depletion?
A)$15,000
B)$23,000
C)$25,000
D)$0
E)None of these

Accepted Answer

Eula's percentage depletion deduction for regular income tax purposes is $30,000 ($200,000 × 15%)prior to the application of the 50% limit which is $25,000 ($50,000 × 50%).So the amount for percentage depletion is limited to $25,000.Since this amount is greater than the cost depletion of $19,000,the depletion deduction is $25,000.The tax preference is the excess of the $25,000 deduction over the $23,000 basis for the mineral property.This results in a preference of $2,000 ($25,000 percentage depletion - $23,000 basis at beginning of year).

Question 3

Celia and Christian,who are married filing jointly,have one dependent and do not itemize deductions.They have taxable income of $82,000 and tax preferences of $53,000 in 2014.What is their AMT base for 2014?
a.$0
b.$77,838
c.$94,450
d.$150,250
e.None of these

Accepted Answer

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Question 4

Ted,who is single,owns a personal residence in the city.He also owns a condo near the ocean.He uses the condo as a vacation home.In March 2014,he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During 2014,he paid the following amounts of interest:  What amount,if any,must Ted recognize as an AMT adjustment in 2014?
A)$0
B)$4,800
C)$6,200
D)$11,000
E)None of these

Accepted Answer

The answer of Ted,who is single,owns a personal residence in...

Question 5

66.	Wallace owns a construction company that builds both commercial and residential buildings. He contracts to build a residential building for $800,000 for which he is eligible to use the completed contract method of accounting. In the current year for regular income tax purposes, Wallace does not recognize any income on the contract. Under the percentage of completion method, the income recognized under the contract would have been $60,000. Wallace’s AMT adjustment is:
A) $0.
B)	$60,000 negative adjustment.
C)	$60,000 positive adjustment.
D)	$800,000 positive adjustment.
E)	None of these.

Accepted Answer

The amount of the AMT adjustment is the difference between the income recognized under the completed contract method ($0)and the amount that would have been recognized under the percentage of completion method ($60,000).Thus,Wallace has a positive adjustment of $60,000.

Question 6

Mitch,who is single and age 66 and has no dependents,had AGI of $100,000 in 2014.His potential itemized deductions were as follows:  What is the amount of Mitch's AMT adjustment for itemized deductions for 2014?
A)$14,800
B)$16,800
C)$19,300
D)$25,800
E)None of these

Accepted Answer

The answer of Mitch,who is single and age 66 and...

Question 7

Omar acquires used 7-year personal property for $100,000 to use in his business in February 2014.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 2014 of what amount?
A)$0
B)$3,580
C)$10,710
D)$14,290
E)None of these

Accepted Answer

For regular income tax purposes,Omar's cost recovery deduction for 2014 is $14,290 ($100,000 × 14.29%).For AMT purposes,Omar's cost recovery deduction for 2014 is $10,710 ($100,000 × 10.71%).Thus,he has a positive AMT adjustment in 2014 of $3,580 ($14,290 - $10,710).

Question 8

Vinny's AGI is $250,000.He contributed $200,000 in cash to the Boy Scouts,a public charity.What is Vinny's charitable contribution deduction for AMT purposes?
A)$0
B)$50,000
C)$75,000
D)$125,000
E)None of these

Accepted Answer

Vinny's charitable contribution deduction for AMT purposes is limited to 50% of AGI ($250,000 AGI × .50 = $125,000).The regular income tax amount for the charitable contribution deduction is the same as the amount for AMT purposes.

Question 9

Bianca and David have the following for 2014:
Regular income tax before credits $32,000
Tentative AMT before credits 45,000
a.Calculate Bianca and David's AMT if they qualify for the adoption expense credit of $11,000.
b.Calculate Bianca and David's AMT if they qualify for the adoption expense credit of $13,190.

Accepted Answer

The answer of Bianca and David have the following for...

Question 10

Marvin,the vice president of Lavender,Inc. ,exercises stock options for 100 shares of stock in March 2014.The stock options are incentive stock options (ISOs).Their exercise price is $20 and the fair market value on the date of exercise is $28.The options were granted in March 2010 and all restrictions on the free transferability had lapsed by the exercise date.
A)If Marvin sells the stock in December 2014 for $3,000,his AMT adjustment in 2014 is a positive adjustment of $800.
B)If Marvin sells the stock in December 2015 for $3,000,his AMT adjustment in 2015 is $0.
C)If Marvin sells the stock in December 2014 for $3,000,his AMT adjustment in 2014 is a negative adjustment of $800.
D)If Marvin sells the stock in December 2015 for $3,000,his AMT adjustment in 2015 is a negative adjustment of $1,000.
E)None of these.

Accepted Answer

If Marvin sells the stock in December 2014,his AMT adjustment in 2014 is $0,because the exercise date and the sales date occur in the same tax year.If Marvin sells the stock in December 2015,his AMT adjustment in 2014 is a positive adjustment of $800 ($2,800 fair market value - $2,000 exercise price),and his AMT adjustment in 2015 is a negative adjustment of $800 ($1,000 recognized gain for regular income tax purposes - $200 recognized gain for AMT purposes).

Question 11

Mauve,Inc. ,has the following for 2012,2013,and 2014 and no prior ACE adjustments.  What is the ACE adjustment for each of the three years?

Accepted Answer

Adjusted current earnings exceed unadjusted AMTI in 2013.So there is a positive ACE adjustment of $1,500 ($2,000 × 75%).For both 2012 and 2014,adjusted current earnings is less than unadjusted AMTI.For 2012,the ACE adjustment is $0 ($2,000 × 75% = $1,500),but limited to $0 (the prior positive ACE adjustments).For 2014,there is a negative ACE adjustment of $1,500 [$3,000 × 75% = $2,250,but limited to $1,500 (the prior positive ACE adjustment)].

Question 12

Use the following data to calculate Jolene's AMTI.

Accepted Answer

The answer of Use the following data to calculate Jolene's...

Question 13

Gunter,who is divorced,has the following items for 2014.

Accepted Answer

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

Question 14

Sand Corporation,a calendar year taxpayer,has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE)] of $900,000 for 2014.If Sand's (ACE)is $975,000,its tentative minimum tax for 2014 is:
A)$0.
B)$56,250.
C)$180,000.
D)$191,250.
E)None of these.

Accepted Answer

Adjusted current earnings adjustment = $56,250 [75% × ($975,000 - $900,000)].Tentative minimum tax = $191,250 [($900,000 AMTI before adjustment + $56,250 adjustment)× 20%].No AMT exemption is allowed because AMTI exceeds $310,000.

Question 15

Akeem,who does not itemize,incurred a net operating loss (NOL)of $50,000 in 2013.His deductions in 2013 included AMT tax preference items of $20,000,and he had no AMT adjustments.Assuming the NOL is not carried back,what is Akeem's ATNOLD carryover to 2014?
A)$50,000
B)$30,000
C)$20,000
D)$40,000
E)None of these

Accepted Answer

$50,000 NOL - $20,000 AMT preferences included in NOL = $30,000 ATNOLD.

Question 16

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

Accepted Answer

The answer of Use the following selected data to calculate...

Question 17

Arlene,who is single,has taxable income for 2014 of $112,000.Calculate her alternative minimum tax,if any,given the following additional information.
 $\begin{array}{l}
\text { AMT adjustments }\
\begin{array}{lc}
\text { Positive } & \$ 22,000 \
\text { Negative } & (25,000) \
\text { Tax preferences } & 46,000
\end{array}
\end{array}$

Accepted Answer

The answer of Arlene,who is single,has taxable income for 2014...

Question 18

Kay,who is single,had taxable income of $0 in 2014.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 2015?
A)$80,560
B)$68,861
C)$68,288
D)$12,272
E)None of these

Accepted Answer

AMT computation: $0 taxable income + $206,300 adjustments + $100,000 exclusion items = $306,300 AMTI - $5,550 AMT exemption = $300,750 AMT base.$47,450 ($182.500 × 26 % AMT rate)+ 33,110 [($300,750 - $182,500)× 28% AMT rate] = $80,560 tentative AMT - $0 regular income tax = $80,560 AMT.
AMT without timing adjustments: $0 taxable income + $100,000 exclusion items = $100,000 AMTI - $52,800 = $47,200 AMT base × 26% AMT rate = $12,272 tentative AMT - $0 regular income tax = $12,272 AMT without timing adjustments = $68,288 ($80,560 - $12,272)AMT credit.

Question 19

In 2005,Collies exercised an incentive stock option (ISO),acquiring 150 shares of stock at an option price of $75 per share (fair market value at the date of exercise was $130 per share).In 2014,the rights in the stock become freely transferable (fair market value is still $130 per share). Which of the following statements is incorrect?
A)Collis has no AMT adjustment from the ISO in 2011.
B)Collis has no taxable income from the ISO in 2011.
C)Collis has an AMT basis of $19,500 in the stock.
D)Collis has an income tax basis of $11,250 in the stock.
E)All of these are correct.

Accepted Answer

Statements a. ,b. ,c. ,and d.are all correct.The transaction has no effect on taxable income or alternative minimum taxable income in 2011 (statements a.and b. ).Note that the AMT adjustment for the spread is in 2014.Collis' basis is equal to FMV at the date of exercise,and his regular income tax basis is equal to his cost (statements c.and d. ).In 2014,Dan has a positive $8,250 ($19,500 - $11,250)adjustment for AMT purposes.

Question 20

In 2014,Glenn had a $108,000 loss on a passive activity.None of the loss is attributable to AMT adjustments or preferences.She has no other passive activities.Which of the following statements is correct?
A)In 2014,Glenn can deduct $108,000 for regular income tax purposes and for AMT purposes.
B)Glenn will have a $108,000 tax preference in 2014 as a result of the passive activity.
C)For regular income tax purposes,none of the loss is allowed in 2014.
D)In 2014,Glenn will have a positive adjustment of $25,000 as a result of the passive loss.
E)None of these.

Accepted Answer

For regular income tax purposes (and for AMT purposes),none of the loss on the passive activity is allowed.Therefore,the passive loss does not cause a difference between taxable income and AMTI.As a result,no AMT adjustment is required.

Quiz 12: Alternative Minimum Tax

Tad and Audria,who are married filing a joint return,have AMTI of $256,000 for 2014.Calculate their AMT exemption.

Celia and Christian,who are married filing jointly,have one dependent and do not itemize deductions.They have taxable income of $82,000 and tax preferences of $53,000 in 2014.What is their AMT base for 2014? a.$0 b.$77,838 c.$94,450 d.$150,250 e.None of these

Mitch,who is single and age 66 and has no dependents,had AGI of $100,000 in 2014.His potential itemized deductions were as follows: What is the amount of Mitch's AMT adjustment for itemized deductions for 2014?

Vinny's AGI is $250,000.He contributed $200,000 in cash to the Boy Scouts,a public charity.What is Vinny's charitable contribution deduction for AMT purposes?

Mauve,Inc. ,has the following for 2012,2013,and 2014 and no prior ACE adjustments. What is the ACE adjustment for each of the three years?

Use the following data to calculate Jolene's AMTI.

Gunter,who is divorced,has the following items for 2014.

Sand Corporation,a calendar year taxpayer,has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE) ] of $900,000 for 2014.If Sand's (ACE) is $975,000,its tentative minimum tax for 2014 is:

Akeem,who does not itemize,incurred a net operating loss (NOL) of $50,000 in 2013.His deductions in 2013 included AMT tax preference items of $20,000,and he had no AMT adjustments.Assuming the NOL is not carried back,what is Akeem's ATNOLD carryover to 2014?

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

Kay,who is single,had taxable income of $0 in 2014.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 2015?

In 2014,Glenn had a $108,000 loss on a passive activity.None of the loss is attributable to AMT adjustments or preferences.She has no other passive activities.Which of the following statements is correct?