Exam 13: At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Heather purchased furniture and fixtures (7-year property)for her retail shop for $50,000.What is the AMT depreciation adjustment required in 2014 if the property was purchased in May 2014,assuming no bonus depreciation was taken?

Joshua purchased business furniture and fixtures (7-year property)for $40,000 in May 2011.On July 15,2014,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 2014 AMT adjustment required as a result of the sale of the assets?

Jon is in the car rental business.Most of his customers rent cars on a daily basis.Jon's car rental business is considered a passive activity since rental activities are always treated as passive activities.

A taxpayer's share of nonrecourse debt is considered an amount at-risk.

Jonathan is married,files a joint return,and has one child.During 2014,Jonathan has $85,000 of taxable income.He has $20,000 of positive AMT adjustments and $28,000 of tax preferences.Since Jonathan rents his home (pays no mortgage interest)and lives in Tennessee (has no state income tax),he does not itemize his deductions but takes the standard deduction.Calculate Jonathan's AMTI (before exclusion amount).

Tax preference items can be either positive or negative.

After computing all tax preferences and AMT adjustments,Adam and his wife Cindy have AMTI of $290,000.If Adam and Cindy file a joint tax return,what exemption amount can they claim for AMT for 2014?

Clio's hot dog stand is only open during lunch on weekdays.In total,Clio,who is the sole owner and operator,worked 450 hours at the hot dog stand during the year.Clio is not considered a material participant with respect to the hot dog stand business.

In 2014,Ethan contributes cash of $50,000 and property with a fair market value of $100,000 and basis of $20,000 in exchange for a 20% interest in the EFP Partnership.The partnership is not a passive activity.For 2014,his share of partnership items were an ordinary loss of $80,000,interest income of $2,000,dividends of $5,000,and capital gains of $4,000.How much of the current year loss is deductible by Ethan and what is Ethan's at-risk amount on December 31,2014?

Beverly works for a large publicly traded company and regularly receives incentive stock options as bonuses.In 2014,Beverly exercises options to purchase 1,000 shares at $48 per share when the market value is $72 per share.What is Beverly's AMT adjustment from the exercise of the options?

Identify factors that increase or decrease the at-risk amount.

Most real estate debt meets the requirements of qualified nonrecourse financing.

Cal reported the following itemized deductions on his 2014 tax return.His AGI for 2014 was $85,000.The mortgage interest is all qualified mortgage interest to purchase his personal residence.For AMT,compute his total itemized deductions.

Which of the following increases the taxpayer's at-risk amount?

Gifts to charity are not allowed for AMT purposes.

Alice is an attorney and earned $175,000 from her practice in the current year.Alice also owns three passive activities.The activities had the following income and losses: What is Alice's adjusted gross income for the current year?

Every taxpayer who calculates depreciation on his or her tax return will have a depreciation adjustment for AMT purposes.

The term "passive activity" includes any activity for the production of income in which the taxpayer does not materially participate.

The AMT tax rate for individuals is 20%.

The term "active participation" is used to determine: