Question 1

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 2

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

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Question 3

Mauve,Inc.,has the following for 2011,2012,and 2013 and no prior ACE adjustments. 
A) $0 $1,500 ($1,500)
B) ($2,000) $2,000 ($3,000)
C) $2,000 ($2,000) $3,000
D) ($1,500) $1,500 $2,250
E) $1,500 ($1,500) ($2,250)

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Question 4

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

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Question 5

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

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Question 6

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 7

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

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Question 8

Use the following data to calculate Diane's AMTI.

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Question 9

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 10

Caroline and Clint are married,have no dependents,and file a joint return in 2012.Use the following selected data to calculate their Federal income tax liability.

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Question 11

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 12

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?
A) $80,500.
B) $68,861.
C) $20,930.
D) $13,403.
E) None of the above.

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 13

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 14

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

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 ...

Question 15

Which of the following statements is correct?
A) A C corporation classified as a small corporation is eligible to have the AMT calculated using the AMT provisions for individuals.
B) A C corporation classified as a small corporation is not subject to the AMT.
C) A C corporation classified as a small corporation is subject to the AMT only on its adjusted current earnings.
D) A C corporation classified as a small corporation is eligible to use the 15%/0% tax rate on net capital gain and qualified dividends rather than the regular tax rates applicable to other C corporations.
E) a., b., and c. are correct.

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A)...

Question 16

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

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Question 17

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

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Question 18

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 19

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:
A) $150,000.
B) $183,750.
C) $195,000.
D) $225,000.
E) None of the above.

Accepted Answer

To calculate the tentative minimum tax for a corporation subject to AMT, you must first determine the corporation's alternative minimum taxable income (AMTI) by taking the regular taxable income and making certain adjustments and preferences. In this case, Sand Corporation's AMTI is $750,000.

You then need to compute the corporation's alternative minimum tax (AMT) base, which is AMTI minus the applicable exemption amount. For corporations with AMTI below $40 million, the exemption amount is $40,000. Therefore, Sand's AMT base is $710,000 ($750,000 - $40,000).

To calculate the tentative minimum tax, you multiply the AMT base by the current AMT rate. The current rate is 20% for AMTI up to $175,000 and 22% for AMTI above that amount, up to $18,333,333. Sand's AMT base falls into the second category, so the rate is 22%.

Therefore, Sand's tentative minimum tax for 2012 is $156,200 ($710,000 x 0.22). However, since Sand has adjusted current earnings (ACE), you must also calculate the ACE adjustment. ACE is a measure of a corporation's economic income and is intended to capture income that is hidden by tax preferences and adjustments.

The ACE adjustment is the difference between Sand's adjusted current earnings and its AMTI. In this case, Sand's ACE is $975,000, which is higher than its AMTI of $750,000. Therefore, the ACE adjustment is $225,000 ($975,000 - $750,000).

To calculate the final tentative minimum tax, you add the ACE adjustment to the previously calculated tentative minimum tax. In this case, Sand's final tentative minimum tax is $183,750 ($156,200 + $225,000). Therefore, the correct answer is B.

Question 20

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

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Quiz 12: Alternative Minimum Tax

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

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

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

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

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:

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

Use the following data to calculate Diane's AMTI.

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:

Caroline and Clint are married,have no dependents,and file a joint return in 2012.Use the following selected data to calculate their Federal income tax liability.

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.

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?

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?

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

Which of the following statements is correct?

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

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

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

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:

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