Exam 12: Alternative Minimum Tax

If Jessica exercises an ISO and disposes of the option in the same tax year,are any AMT adjustments required?

The net capital gain included in an individual taxpayer's AMT base is eligible for the beneficial lower tax rate on net capital gain.This favorable alternative rate applies both in calculating the regular income tax and the AMT.

The deduction for personal and dependency exemptions is allowed for regular income tax purposes,but is disallowed for AMT purposes.This results in a positive AMT adjustment.

Danica owned a car that she used exclusively for business.The car was purchased in 2012 and sold in 2016 for a recognized gain of $9,000.However,the sale resulted in no AMT.Why?

Benita expensed mining exploration and development costs of $500,000 incurred in the current tax year.She will be required to make negative AMT adjustments for each of the next ten years and a positive AMT adjustment in the current tax year.

How can the positive AMT adjustment for research and experimental expenditures be avoided?

When qualified residence interest exceeds qualified housing interest,the positive adjustment required in calculating AMT is a timing adjustment.That is,in the future,there will be an offsetting negative adjustment.Comment on the validity of this statement.

Darin's,who is age 30,records itemized deductions in calculating 2016 taxable income as follows. Medical expenses [$15,000 - 10%($100,000)] $ 5,000 Mortgage interest on personal residence 7,000 State income taxes 4,000 Real property taxes 4,500 Personal property taxes 2,500 Casualty loss [$14,000 (after $100 floor)- (10% × $100,000)] 4,000 Charitable contributions 3,500 Gambling losses ($3,200 limited to gambling income of $1,000) 1,000 Miscellaneous itemized deductions [$2,500 - 2%($100,000)] 500 Itemized deductions $32,000 ​ a.Calculate Darin's itemized deductions for AMT purposes using the direct method. b.Calculate Darin's itemized deductions for AMT purposes using the indirect method.

Gunter,who is divorced,reports the following items for 2016. Salary $60,000 Gain on sale of land held nine months (regular income tax basis is $4,000 less than AMT basis) 10,000 Traditional IRA contribution 5,000 Alimony paid 9,000 Itemized deductions: Charitable contributions $3,000 Home mortgage interest on his principal residence 4,000 State income taxes 2,000 9,000 Private activity municipal bond interest 15,000 ​ Calculate Gunter's AMTI for 2016.

Negative AMT adjustments for the current year caused by timing differences are offset by the positive AMT adjustments in prior tax years also caused by timing differences.

Ashley can reduce her regular income tax liability from $47,000 to $43,500 as the result of the lower tax rate on net capital gain.Ashley's tentative minimum tax is $51,000. ​

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 2016,he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During 2016,he paid the following amounts of interest. ​ ∙ On his personal residence $15,500 ∙ On the condo 6,200 ∙ On the home equity loan 4,800 ∙ On credit card obligations 1,700 What amount,if any,must Ted recognize as an AMT adjustment in 2016?

The AMT adjustment for research and experimental expenditures can be avoided if the taxpayer capitalizes the expenditures and amortizes them over a 10-year period for regular tax purposes.

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

Sand Corporation,a calendar year C corporation,reports alternative minimum taxable income of $900,000 for 2016.Sand's tentative minimum tax for 2016 is:

Prior to the effect of tax credits,Eunice's regular income tax liability is $325,000 and her tentative minimum tax is $312,000.Eunice has general business credits available of $20,000.Calculate Eunice's tax liability after tax credits.

Assuming no phaseout,the AMT exemption amount for a married taxpayer filing separately for 2016 is more than the AMT exemption amount for C corporations.

For individual taxpayers,the AMT credit is applicable for the AMT that results from timing differences,but it is not available for the AMT that results from the adjustment for itemized deductions or exclusion preferences.

Caroline and Clint are married,have no dependents,and file a joint return in 2016.Use the following selected data to calculate their Federal income tax liability. ​ AMTI $285,000 Regular income tax liability 42,066 AMT preferences 90,000

If the regular income tax deduction for medical expenses is $0,under certain circumstances the AMT deduction for medical expenses can be greater than $0.