Question 1

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.

Accepted Answer

The statement is true. The lower tax rate on net capital gain applies to both regular income tax and AMT base.

Question 2

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes,there will be an AMT adjustment.

Accepted Answer

According to the IRS, if circulation expenditures (such as advertising and promotional materials) are not amortized over a three-year period for regular income tax purposes, there will be an adjustment for Alternative Minimum Tax (AMT) purposes. This is because AMT rules require that certain expenses be capitalized and amortized over a period of years.

Question 3

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

Accepted Answer

False

Question 4

Prior to the effect of tax credits,Clarence's regular income tax liability is $200,000 and his tentative AMT is $180,000.Clarence holds nonrefundable business tax credits of $35,000.His tax liability is $165,000.

Accepted Answer

It is not accurate to say that his tax liability is $165,000 prior to the effect of tax credits, as the question only provided information on his regular income tax liability and tentative AMT. The effect of the tax credits should be taken into account to determine his actual tax liability.

Question 5

If the AMT base is greater than $186,300,the AMT rate for an individual taxpayer is the same as the AMT rate for a C corporation.

Accepted Answer

The AMT rate for individual taxpayers and C corporations differ. For individuals, the AMT rate is 26% or 28%, while for C corporations, it is a flat 20%.

Question 6

A taxpayer who expenses circulation expenditures in the year incurred for regular income tax purposes will have a positive AMT adjustment in the following year.

Accepted Answer

Circulation expenditures are not deductible for AMT purposes, so there would be no AMT adjustment in the following year.

Question 7

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

Accepted Answer

Business tax credits can reduce both the AMT (Alternative Minimum Tax) and the regular income tax, but they may not reduce them in the same way due to the different calculations and rules applied to the AMT versus the regular tax system.

Question 8

Joel placed real property in service in 2016 that cost $900,000 and used MACRS depreciation for regular income tax purposes.He is required to make a positive adjustment for AMT purposes in 2016 for the excess of depreciation calculated for regular income tax purposes over the depreciation calculated for AMT purposes.

Accepted Answer

The answer of Joel placed real property in service in...

Question 9

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

The tentative minimum tax (TMT) is always greater than or equal to the regular income tax liability, and in this case, the TMT is $112,000 while the regular income tax liability is $99,000. The AMT is then the difference between the TMT and the regular income tax liability, which is $13,000.

Question 10

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.

Accepted Answer

The AMT exemption amount for married taxpayers filing separately for 2016 is $40,000, while the AMT exemption amount for C corporations is $0. Therefore, the statement is true.

Question 11

Paul incurred circulation expenditures of $180,000 in 2016 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for each of 2017,2018,and for 2019.

Accepted Answer

The answer of Paul incurred circulation expenditures of $180,000 in...

Question 12

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

This statement is true. The alternative minimum tax was created to ensure that high-income taxpayers paid at least a minimum amount of tax, even if they were able to use deductions and other provisions to substantially reduce their regular income tax liability.

Question 13

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

Accepted Answer

The answer of Since most tax preferences are merely timing...

Question 14

The required adjustment for AMT purposes for pollution control facilities placed in service this year is equal to the difference between the amortization deduction allowed for regular income tax purposes and the depreciation deduction computed under ADS.

Accepted Answer

The answer of The required adjustment for AMT purposes for...

Question 15

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

This is true because once the property has fully depreciated, there is no remaining basis for AMT adjustments to affect. Therefore, any positive and negative adjustments made for AMT purposes will ultimately cancel each other out, resulting in a net zero adjustment.

Question 16

Keosha acquires 10-year personal property to use in her business in 2016 and takes the maximum cost recovery deduction for regular income tax purposes.As a result of this,Keosha will incur a positive AMT adjustment in 2016.

Accepted Answer

The maximum cost recovery deduction for regular income tax purposes may not be the same as the amount allowed for AMT purposes, resulting in a positive AMT adjustment.

Question 17

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.

Accepted Answer

This statement is true. The AMT system is designed to ensure that taxpayers who have significant timing differences in their income and deductions from year to year do not permanently escape paying tax through the regular tax system. Therefore, negative AMT adjustments in the current year that are caused by timing differences are offset by positive AMT adjustments in prior tax years that were also caused by timing differences. This helps ensure that taxpayers ultimately pay the right amount of tax over time, even if their income and deductions are unevenly distributed across different years.

Question 18

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.

Accepted Answer

The answer of The phaseout of the AMT exemption amount...

Question 19

The AMT calculated using the indirect method will produce a different amount than the AMT calculated using the direct method.

Accepted Answer

The answer of The AMT calculated using the indirect method...

Question 20

AMT adjustments can be positive or negative,whereas AMT preferences are always positive.

Accepted Answer

AMT adjustments can be either added (positive) or subtracted (negative) from regular taxable income to calculate alternative minimum taxable income, whereas AMT preferences are always added to regular taxable income to calculate alternative minimum taxable income.

Quiz 12: Alternative Minimum Tax