Question 1

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

Accepted Answer

The AMT was enacted as a backup to the r

Question 2

Kerri, who has AGI of $120,000, itemized her deductions in the current year. She incurred unreimbursed employee business expenses of $8,500. Kerri incurs a positive AMT adjustment of $2,400 in computing AMT.

Accepted Answer

A) True 
 B)False

Question 3

In 2017, Glenn recorded 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?

Accepted Answer

A) In 2017, Glenn can deduct $108,000 for regular income tax purposes and for AMT purposes. 
B) Glenn reports a $108,000 tax preference in 2017 as a result of the passive activity. 
C) For regular income tax purposes, none of the passive activity loss is allowed in 2017. 
D) In 2017, Glenn reports a positive adjustment of $25,000 as a result of the passive activity loss. 
A) In 2017, Glenn can deduct $108,000 for regular income tax purposes and for AMT purposes. 
B) Glenn reports a $108,000 tax preference in 2017 as a result of the passive activity. 
C) For regular income tax purposes, none of the passive activity loss is allowed in 2017. 
D) In 2017, Glenn reports a positive adjustment of $25,000 as a result of the passive activity loss.

Question 4

Which of the following can produce an AMT preference rather than an AMT adjustment?

Accepted Answer

A)  Interest on private activity bonds issued in 2015. 
B)  Percentage depletion. 
C)  Incentive stock options (ISOs). 
D)  Only a. and b.e. a., b., and c. 
A)  Interest on private activity bonds issued in 2015. 
B)  Percentage depletion. 
C)  Incentive stock options (ISOs). 
D)  Only a. and b.e. a., b., and c.

Question 5

For regular income tax purposes, Yolanda, who is single, is in the 35% tax bracket. Her AMT base is $220,000. Her tentative AMT is:

Accepted Answer

A) $57,200. 
B) $57,844. 
C) $61,600. 
D) $77,650. 
E) None of the above. 
A) $57,200. 
B) $57,844. 
C) $61,600. 
D) $77,650. 
E) None of the above.

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

Mauve, Inc., records the following gross receipts in 2015, 2016, and 2017. ​
  What is Mauve, Inc.'s TMT in each of these three years?
​
2015 2016 2017

Accepted Answer

A) $0 $0 $0 
B) $0 $0 $1,160,000 
C) $0 $1,740,000 $1,160,000 
D) $980,000 $1,740,000 $1,160,000 
E) $0 $1,740,000 $0 
A) $0 $0 $0 
B) $0 $0 $1,160,000 
C) $0 $1,740,000 $1,160,000 
D) $980,000 $1,740,000 $1,160,000 
E) $0 $1,740,000 $0

Question 8

In 2017, Linda incurs circulation expenses of $240,000 which she deducts in calculating taxable income.
a.Calculate Linda's AMT adjustment for circulation expenses for 2017, 2018, 2019, and 2020.
b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2017.​

Accepted Answer

The answer of In 2017, Linda incurs circulation expenses of...

Question 9

After personal property is fully depreciated for both regular income tax purposes and AMT purposes, the positive and negative adjustments that have been made for AMT purposes will net to zero.

Accepted Answer

A) True 
 B)False

Question 10

What tax rates apply in calculating the TMT for an individual taxpayer?

Accepted Answer

For an individual taxpayer, in

Question 11

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

Accepted Answer

In converting regular taxable

Question 12

Business tax credits reduce the AMT and the regular income tax in the same way.

Accepted Answer

A) True 
 B)False

Question 13

Dale owns and operates Dale's Emporium as a sole proprietorship. On January 30, 2003, Dale's Emporium acquired a warehouse for $100,000. For regular income tax purposes in 2017, depreciation was deducted under MACRS using a 2.564% rate. Determine the AMT adjustment for depreciation and indicate whether it is positive or negative.

Accepted Answer

A) $64 negative adjustment. 
B) $64 positive adjustment. 
C) No adjustment is required because Dale's Emporium used the Alternative Depreciation System (ADS) to compute depreciation on the property for AMT purposes. 
D) No adjustment is required because Dale's Emporium used MACRS to compute the depreciation of the property for regular income tax purposes. 
A) $64 negative adjustment. 
B) $64 positive adjustment. 
C) No adjustment is required because Dale's Emporium used the Alternative Depreciation System (ADS) to compute depreciation on the property for AMT purposes. 
D) No adjustment is required because Dale's Emporium used MACRS to compute the depreciation of the property for regular income tax purposes.

Question 14

Do AMT adjustments and AMT preferences increase or decrease AMTI?

Accepted Answer

AMT adjustments can be both po

Question 15

​A, B and C are each single, report wage income of $135,000, and take the standard deduction. The following additional information is provided about each taxpayer. ​
A: Resides in New York. $45,000 interest income from Treasury bonds.
B: Resides in Nevada. $45,000 capital gain from the sale of stock.
C: Resides in Florida. $45,000 interest income from private-activity municipal bonds.
​
All else being equal and taking into consideration the principles underlying the AMT, which of these taxpayers has the highest likelihood of being subject to the AMT in the current tax year?
​
​

Accepted Answer

A) ​Taxpayer A. 
B) ​Taxpayer B. 
C) ​Taxpayer C. 
D) ​Taxpayer D. 
A) ​Taxpayer A. 
B) ​Taxpayer B. 
C) ​Taxpayer C. 
D) ​Taxpayer D.

Question 16

​Jesse placed equipment that cost $48,000 in service in 2015 (neither § 179 expensing nor bonus depreciation was elected). On July 1, 2017, Jesse sold the equipment for $22,000. ​
Regular tax and AMT depreciation amounts for the equipment are computed as follows.
​
​
  ​
What AMT adjustments will be required for the equipment for 2017?
​

Accepted Answer

A) ​$5,844 positive adjustment depreciation; $1,292 positive adjustment equipment sale 
B) ​$324 positive adjustment depreciation; $(5,844) negative adjustment equipment sale 
C) $648 positive adjustment depreciation; $(2,276) negative adjustment equipment sale 
D) ​$324 positive adjustment depreciation; $0 adjustment for the equipment sale 
A) ​$5,844 positive adjustment depreciation; $1,292 positive adjustment equipment sale 
B) ​$324 positive adjustment depreciation; $(5,844) negative adjustment equipment sale 
C) $648 positive adjustment depreciation; $(2,276) negative adjustment equipment sale 
D) ​$324 positive adjustment depreciation; $0 adjustment for the equipment sale

Question 17

In calculating her 2017 taxable income, Rhonda, who is age 45, claims the following itemized deductions.
​
   Calculate Rhonda's AMT adjustment for itemized deductions.

Accepted Answer

Rhonda's allowed itemized dedu

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Gunter, who is divorced, reports the following items for 2017. Calculate Gunter's 2017 AMTI.
​
   ​

Accepted Answer

Gunter's regular income tax ta

Question 20

If Abby's alternative minimum taxable income exceeds her regular taxable income, she will incur an alternative minimum tax.

Accepted Answer

A) True 
 B)False

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

Kerri, who has AGI of $120,000, itemized her deductions in the current year. She incurred unreimbursed employee business expenses of $8,500. Kerri incurs a positive AMT adjustment of $2,400 in computing AMT.

In 2017, Glenn recorded 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?

Which of the following can produce an AMT preference rather than an AMT adjustment?

For regular income tax purposes, Yolanda, who is single, is in the 35% tax bracket. Her AMT base is $220,000. Her tentative AMT 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.

Mauve, Inc., records the following gross receipts in 2015, 2016, and 2017. What is Mauve, Inc.'s TMT in each of these three years? 2015 2016 2017

In 2017, Linda incurs circulation expenses of $240,000 which she deducts in calculating taxable income. a.Calculate Linda's AMT adjustment for circulation expenses for 2017, 2018, 2019, and 2020. b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2017.

After personal property is fully depreciated for both regular income tax purposes and AMT purposes, the positive and negative adjustments that have been made for AMT purposes will net to zero.

What tax rates apply in calculating the TMT for an individual taxpayer?

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

Business tax credits reduce the AMT and the regular income tax in the same way.

Do AMT adjustments and AMT preferences increase or decrease AMTI?

In calculating her 2017 taxable income, Rhonda, who is age 45, claims the following itemized deductions. Calculate Rhonda's AMT adjustment for itemized deductions.

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

Gunter, who is divorced, reports the following items for 2017. Calculate Gunter's 2017 AMTI.

If Abby's alternative minimum taxable income exceeds her regular taxable income, she will incur an alternative minimum tax.

An Introduction to Taxation and Understanding Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination; an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

Exam 12: Alternative Minimum Tax

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

Kerri, who has AGI of $120,000, itemized her deductions in the current year. She incurred unreimbursed employee business expenses of $8,500. Kerri incurs a positive AMT adjustment of $2,400 in computing AMT.

In 2017, Glenn recorded 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?

Which of the following can produce an AMT preference rather than an AMT adjustment?

For regular income tax purposes, Yolanda, who is single, is in the 35% tax bracket. Her AMT base is $220,000. Her tentative AMT 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.

Mauve, Inc., records the following gross receipts in 2015, 2016, and 2017. ​ What is Mauve, Inc.'s TMT in each of these three years? ​ 2015 2016 2017

In 2017, Linda incurs circulation expenses of $240,000 which she deducts in calculating taxable income. a.Calculate Linda's AMT adjustment for circulation expenses for 2017, 2018, 2019, and 2020. b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2017.​

After personal property is fully depreciated for both regular income tax purposes and AMT purposes, the positive and negative adjustments that have been made for AMT purposes will net to zero.

What tax rates apply in calculating the TMT for an individual taxpayer?

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

Business tax credits reduce the AMT and the regular income tax in the same way.

Do AMT adjustments and AMT preferences increase or decrease AMTI?

In calculating her 2017 taxable income, Rhonda, who is age 45, claims the following itemized deductions. ​ Calculate Rhonda's AMT adjustment for itemized deductions.

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

Gunter, who is divorced, reports the following items for 2017. Calculate Gunter's 2017 AMTI. ​ ​

If Abby's alternative minimum taxable income exceeds her regular taxable income, she will incur an alternative minimum tax.

An Introduction to Taxation and Understanding Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination; an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

Mauve, Inc., records the following gross receipts in 2015, 2016, and 2017. What is Mauve, Inc.'s TMT in each of these three years? 2015 2016 2017

In 2017, Linda incurs circulation expenses of $240,000 which she deducts in calculating taxable income. a.Calculate Linda's AMT adjustment for circulation expenses for 2017, 2018, 2019, and 2020. b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2017.

In calculating her 2017 taxable income, Rhonda, who is age 45, claims the following itemized deductions. Calculate Rhonda's AMT adjustment for itemized deductions.

Gunter, who is divorced, reports the following items for 2017. Calculate Gunter's 2017 AMTI.