Exam 15: Alternative Minimum Tax

Marvin, the vice president of Lavender, Inc., exercises stock options for 100 shares of stock in March 2012. The stock options are incentive stock options (ISOs). Their exercise price is $20 and the fair market value on the date of exercise is $28. The options were granted in March 2009 and all restrictions on the free transferability had lapsed by the exercise date.

Moore incurred circulation expenditures of $300,000 in 2012 and deducted that amount for regular income tax purposes.Moore has a $100,000 negative AMT adjustment for 2013, for 2014, and for 2015.

Under what circumstances are corporations exempt from the AMT?

In determining the amount of the AMT adjustments, discuss the difference in the treatment of a building placed in service after 1986 and before January 1, 1999 and a building placed in service after December 31, 1998.

Akeem, who does not itemize, incurred a net operating loss (NOL) of $50,000 in 2012.His deductions in 2012 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 2013?

Sand, Inc., has AMTI of $200,000. Calculate the amount of the AMT exemption if:

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

Which of the following statements is correct?

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.

What is the relationship between taxable income and AMTI? The indirect method, rather than the direct method, is normally used to calculate the AMT (i.e., the starting point is taxable income).

Which of the following statements is correct?

Durell owns a construction company that builds residential housing.The company is eligible to use the completed contract method for regular income tax purposes.What can Durell do to minimize his AMT?

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.

In May 2011, Egret, Inc.issues options to Andrea, a corporate officer, to purchase 200 shares of Egret stock under an ISO plan.At the date the stock options are issued, the fair market value of the stock is $900 per share and the option price is $1,200 per share.The stock becomes freely transferable in 2012.Andrea exercises the options in November 2011 when the stock is selling for $1,600 per share.She sells the stock in December 2013 for $1,800 per share.

Sage, Inc., has the following gross receipts and taxable income: Is Sage, Inc., subject to the AMT in 2012?

Wallace owns a construction company that builds both commercial and residential buildings. He contracts to build a residential building for $800,000 for which he is eligible to use the completed contract method of accounting. In the current year for regular income tax purposes, Wallace does not recognize any income on the contract. Under the percentage of complete method, the income recognized under the contract would have been $60,000. Wallace's AMT adjustment is:

Interest income on private activity bonds issued before 2009, reduced by expenses incurred in carrying the bonds, is a tax preference item that is included in computing AMTI.

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 2012, he borrowed $50,000 on a home equity loan and used the proceeds to acquire a luxury automobile.During 2012, he paid the following amounts of interest: What amount, if any, must Ted recognize as an AMT adjustment in 2012?

The recognized gain for regular income tax purposes and the recognized gain for AMT purposes on the sale of stock acquired under an incentive stock option (ISO) program are always the same because the adjusted basis is the same.

Cindy, who is single and has no dependents, has adjusted gross income of $50,000 in 2012.Her potential itemized deductions are as follows: What is the amount of Cindy's AMT adjustment for itemized deductions for 2012?