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Exam 12: Alternative Minimum Tax

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Question 1

Multiple Choice

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Which of the following statements is correct?

A) If the tentative AMT is $10,000 and the regular income tax liability is $12,000,the AMT is $2,000.
B) If the tentative AMT is $12,000 and the regular income tax liability is $10,000,the AMT is $12,000.
C) If the tentative AMT is $10,000 and the regular income tax liability is $12,000,the AMT is a negative $2,000.
D) If the tentative AMT is $12,000,and the regular income tax liability is $10,000,the AMT is $2,000.
E) None of these.

F) B) and C)
G) All of the above

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Question 2

Multiple Choice

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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

F) B) and D)
G) All of the above

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Question 3

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What is the purpose of the AMT exemption amount? What is the maximum amount for each filing status for an individual taxpayer and for a corporate taxpayer?

Prior to the effect of tax credits,Clarence's regular income tax liability is $200,000 and his tentative AMT is $180,000.Clarence has nonrefundable business tax credits of $35,000.His tax liability is $165,000.

Madge's tentative AMT is $112,000.Her regular income tax liability is $99,000.Madge's AMT is $13,000.

If a taxpayer deducts the standard deduction in calculating regular taxable income,what effect does this have in calculating AMTI?

Beige,Inc. ,has AMTI of $200,000.Calculate the amount of the AMT exemption if: a.Beige is a small corporation for AMT purposes. b.Beige is not a small corporation for AMT purposes.

In calculating the AMT using the indirect method,do AMT adjustments and AMT tax preferences increase or decrease AMTI?

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?

If a gambling loss itemized deduction is permitted for regular income tax purposes,there will be no AMT adjustment associated with the gambling loss.

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

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:

In deciding to enact the alternative minimum tax,Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

In the current tax year,Ben exercised an incentive stock option (ISO),acquiring stock with a fair market value of $190,000 for $170,000.His AMT basis for the stock is $170,000,his regular income tax basis for the stock is $170,000,and his AMT adjustment is $0 ($170,000 - $170,000).

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

Because passive losses are not deductible in computing either taxable income or AMTI,no adjustment for passive losses is required for AMT purposes.

In calculating her 2014 taxable income,Rhonda,who is age 45,deducts the following itemized deductions. Calculate Rhonda's AMT adjustment for itemized deductions.

Lilly is single and has no taxable income for 2014.She has positive timing adjustments of $600,000 and AMT exclusions of $200,000. a.Calculate Lilly's tentative AMT. b.Calculate Lilly's AMT credit carryover to 2015.

A taxpayer has a passive activity loss for the current tax year for regular income tax purposes and for AMT purposes.Is it possible that the passive activity losses will be the same amount?

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes,there will be an AMT adjustment.