Exam 15: Alternative Minimum Tax

In 2012, 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).

The phaseout of the AMT exemption amount for a taxpayer filing as a head of household both begins and ends at a higher income level than it does for a single taxpayer.

Robin, who is a head of household and age 42, provides you with the following information from his financial records for 2012. Calculate his AMT for 2012.

In 2012, Amber had a $100,000 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?

Since most tax preferences are merely timing differences, they eventually will reverse and net to zero.

Mauve, Inc., has the following for 2011, 2012, and 2013 and no prior ACE adjustments.

Nell has a personal casualty loss deduction of $14,500 for regular income tax purposes. The deduction would have been $26,600, but it had to be reduced by $100 and by $12,000 (10% ´ $120,000 AGI). For AMT purposes, the casualty loss deduction is $26,600.

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

Is it possible that no AMT adjustment is necessary for medical expenses in calculating AMTI even though the floor limitation is different (7.5% of AGI for regular income tax compared to 10% for AMT purposes)?

Miriam, who is a head of household and age 36, provides you with the following information from her financial records for 2012. Calculate her AMTI for 2012.

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.

In 2012, Louise incurs circulation expenses of $330,000 which she deducts in calculating taxable income.

Prior to the effect of the tax credits, Justin's regular income tax liability is $200,000 and his tentative AMT is $195,000.Justin has the following credits: Calculate Justin's tax liability after credits.

On January 3, 1998, Parrot Corporation acquired an office building for $300,000 and computed depreciation under ADS (Alternative Depreciation System) for regular income tax purposes. The ADS rate for the first year is 2.396% and for the fifteenth year is 2.50% (MACRS rates would have been 2.461% and 2.564% respectively). What is Parrot's AMT adjustment (or preference) for depreciation with respect to the office building for 1998 and for 2012?

Use the following data to calculate Diane's AMTI.

For the ACE adjustment, discuss the relationship between ACE and unadjusted AMTI.

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

Kaya is in the 33% marginal tax bracket.She has a net capital gain of $90,000 on the sale of land which is eligible for the alternative tax on net capital gain in calculating the regular income tax.Discuss the tax rate that applies to the $90,000 net capital gain in calculating the tentative AMT for Kaya.

What itemized deductions are allowed for both regular income tax purposes and for AMT purposes?

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