Joshua purchased business furniture and fixtures 7-year property)for $40,000 in May 2013.On July 15,2016,Joshua sold the furniture and fixtures for $30,000.During his years of ownership,he had taken $27,504 of depreciation for regular tax purposes.AMT depreciation for that period was $17,276.What is the 2016 AMT adjustment required as a result of the sale of the assets?
A)$7,276.
B)$17,504.
C)$0.
D)$10,228.

Question

Quizplus · Accepted Answer

The adjusted basis of the furniture and fixtures in 2016 is calculated as follows:

Cost: $40,000 
Depreciation taken for regular tax purposes: $27,504 
Adjusted basis: $12,496 ($40,000 - $27,504)

The AMT basis is the same as the regular tax basis, as no different depreciation method was used for AMT purposes.

The sale of the furniture and fixtures for $30,000 results in a realized loss of $2,496 ($30,000 - $12,496).

The AMT adjustment required is the difference between the realized loss and the AMT depreciation taken during ownership:

$2,496 - $17,276 = -$14,780

However, the maximum AMT adjustment allowed in a given year is the amount by which the gain or loss from the disposition at the regular tax level exceeds the gain or loss at the AMT level.

In this case, since the furniture and fixtures were sold at a loss at both the regular tax and AMT levels, the AMT adjustment is zero ($0).

Therefore, the correct choice is D ($10,228)

Joshua Purchased Business Furniture and Fixtures 7-Year Property)for $40,000 in May