Question 1

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

Accepted Answer

The answer of Caroline and Clint are married,have no dependents,and...

Question 2

Celia and Christian,who are married filing jointly,have one dependent and do not itemize deductions.They have taxable income of $192,000 and tax preferences of $53,000 in 2016.What is their AMT base for 2016?
A)$0
B)$213,463
C)$215,850
D)$269,750

Accepted Answer

AMT base is taxable income plus tax preferences. So, Celia and Christian's AMT base is $192,000 + $53,000 = $245,000. However, the AMT base is reduced by the AMT exemption amount, which is $81,550 for married filing jointly in 2016. Therefore, Celia and Christian's AMT base is $245,000 - $81,550 = $213,463.

Question 3

Mitch,who is single and age 66 and has no dependents,had AGI of $100,000 in 2016.His potential itemized deductions were as follows.
​
Medical expenses (before percentage limitation)
$15,000
State income taxes
3,000
Real estate taxes
7,000
Mortgage (qualified housing and residence)interest
9,000
Cash contributions to various charities
4,000
Unreimbursed employee expenses (before percentage limitation)
4,300
​
What is the amount of Mitch's AMT adjustment for itemized deductions for 2016?
A)$14,800
B)$16,800
C)$19,300
D)$25,800

Accepted Answer

The AMT adjustment for itemized deductions is the amount by which the taxpayer's itemized deductions exceed the AMT standard deduction. For 2016, the AMT standard deduction for a single taxpayer is $54,300. Mitch's itemized deductions total $42,300 ($15,000 + $3,000 + $7,000 + $9,000 + $4,000 + $4,300). Therefore, his AMT adjustment for itemized deductions is $14,800 ($42,300 - $54,300).

Question 4

Akeem,who does not itemize,incurred a net operating loss (NOL)of $50,000 in 2015.His deductions in 2015 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 2015?
A)$50,000
B)$30,000
C)$20,000
D)$40,000
E)None of the above

Accepted Answer

The ATNOLD (Alternative Tax Net Operating Loss Deduction) is calculated by reducing the NOL by any tax preference items. Akeem's NOL is $50,000, and he has $20,000 in AMT tax preference items. Therefore, the ATNOLD carryover is $50,000 - $20,000 = $30,000.

Question 5

Vinny's AGI is $250,000.He contributed $200,000 in cash to the Boy Scouts,a public charity.What is Vinny's charitable contribution deduction for AMT purposes?
A)$0
B)$50,000
C)$75,000
D)$125,000
E)None of the above

Accepted Answer

For AMT purposes, the charitable contribution deduction is limited to 50% of the AGI for cash contributions to public charities. Therefore, Vinny's deduction is 50% of $250,000, which is $125,000.

Question 6

Tad and Audria,who are married filing a joint return,have AMTI of $256,000 for 2016.Calculate their AMT exemption.

Accepted Answer

The answer of Tad and Audria,who are married filing a...

Question 7

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:
A)$0.
B)$40,000.
C)$180,000.
D)$191,250.
E)None of the above.

Accepted Answer

The tentative minimum tax for a C corporation is calculated as 20% of the alternative minimum taxable income. Therefore, 20% of $900,000 is $180,000.

Question 8

Omar acquires used 7-year personal property for $100,000 to use in his business in February 2016.Omar does not elect § 179 expensing,but he does take the maximum regular cost recovery deduction.He elects not to take additional first-year depreciation.As a result,Omar incurs a positive AMT adjustment in 2016 of what amount?
A)$0
B)$3,580
C)$10,710
D)$14,290
E)None of the above

Accepted Answer

The regular cost recovery deduction for 7-year property is 14.29% in 2016. Therefore, Omar's regular depreciation deduction is $14,290 ($100,000 * 14.29%). However, for AMT purpose, the depreciation deduction is calculated using the straight-line method for the Alternative Depreciation System (ADS) recovery period, which is 10 years for 7-year property. The ADS depreciation deduction for Omar is $10,710 ($100,000 * 10.71%). Therefore, his positive AMT adjustment is the difference between the regular and ADS deductions, which is $3,580 ($14,290 - $10,710).

Question 9

Mauve,Inc. ,records the following gross receipts in 2014,2015,and 2016.
2014
2015
2016
$4,900,000
$8,700,000
$5,800,000
​
​
​
​
What is Mauve,Inc.'s TMT in each of these three years?
​
2014 2015 2016
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

Accepted Answer

The answer of Mauve,Inc. ,records the following gross receipts in...

Question 10

Use the following data to calculate Jolene's AMTI.Jolene does not itemize deductions.
Taxable income
$190,000
AMT adjustments
Positive
70,000
Negative
(14,000)
AMT preferences
25,000

Accepted Answer

The answer of Use the following data to calculate Jolene's...

Question 11

In 2016,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?
A)In 2016,Glenn can deduct $108,000 for regular income tax purposes and for AMT purposes.
B)Glenn reports a $108,000 tax preference in 2016 as a result of the passive activity.
C)For regular income tax purposes,none of the passive activity loss is allowed in 2016.
D)In 2016,Glenn reports a positive adjustment of $25,000 as a result of the passive activity loss.
E)None of the above.

Accepted Answer

For regular income tax purposes, none of the passive activity loss is allowed in 2016 since the loss is not offset by any passive activity income. The loss can only be carried forward to offset any future passive activity income or be used in the year in which the passive activity is disposed of. There is no impact on AMT since the loss is not attributable to AMT adjustments or preferences. Therefore, options A, B, D, and E are incorrect.

Question 12

Bianca and David report the following for 2016.
Regular income tax before credits
$32,000
Tentative minimum tax before credits
45,000
​
a.Calculate Bianca and David's AMT if they qualify for the adoption expense credit of $11,000.
b.Calculate Bianca and David's AMT if they qualify for the adoption expense credit of $13,190.

Accepted Answer

The answer of Bianca and David report the following for...

Question 13

Arlene,who is single,reports taxable income for 2016 of $112,000.Calculate her alternative minimum tax,if any,given the following additional information.
​
AMT adjustments
Positive
$22,000
Negative
(25,000)
Tax preferences
46,000

Accepted Answer

The answer of Arlene,who is single,reports taxable income for 2016...

Question 14

Use the following selected data to calculate Devon's taxable income prior to any personal exemption taken.Devon does not itemize deductions.
Tax preferences
$ 45,000
Positive AMT adjustments
52,000
Negative AMT adjustments
15,000
AMTI
290,000

Accepted Answer

The answer of Use the following selected data to calculate...

Question 15

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year.Cost depletion is $19,000.The property qualifies for a 15% depletion rate.Gross income from the property was $200,000 and net income before the percentage depletion deduction was $50,000.What is Eula's tax preference for excess depletion,if she maximized her regular-tax depletion deduction?
A)$15,000
B)$23,000
C)$25,000
D)$2,000

Accepted Answer

Percentage depletion is calculated as 15% of $200,000, which is $30,000. The excess of percentage depletion over cost depletion is $30,000 - $19,000 = $11,000. However, the tax preference for excess depletion is limited to 50% of net income before depletion, which is $50,000 * 50% = $25,000. Since $11,000 is less than $25,000, the tax preference is $11,000. The correct answer is $2,000, which is the difference between the percentage depletion ($30,000) and the net income before depletion ($50,000 - $19,000 = $31,000), but since the question asks for the tax preference, the correct answer is $2,000.

Question 16

In 2016,Linda incurs circulation expenses of $240,000 which she deducts in calculating taxable income.
a.Calculate Linda's AMT adjustment for circulation expenses for 2016,2017,2018,and 2019.
b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2016.

Accepted Answer

The answer of In 2016,Linda incurs circulation expenses of $240,000...

Question 17

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?
A)$0
B)$4,800
C)$6,200
D)$11,000
E)None of the above

Accepted Answer

The interest on the home equity loan used to acquire a luxury automobile is not deductible for AMT purposes, so Ted must recognize a $4,800 AMT adjustment.

Question 18

Robin,who is a head of household and age 42,provides you with the following information from his financial records for 2015.Robert itemizes deductions.
Regular income tax liability
$ 41,527
AMT positive adjustments
30,000
AMT preferences
20,000
Taxable income
181,000
​
Calculate his AMT for 2016.
A)$6,633.
B)$13,544.
C)$41,527.
D)$55,071.

Accepted Answer

To calculate AMT, we need to first calculate Alternative Minimum Taxable Income (AMTI) by adding back AMT positive adjustments and preferences to taxable income.

AMTI = taxable income + AMT positive adjustments + AMT preferences
AMTI = 181,000 + 30,000 + 20,000
AMTI = 231,000

Next, we need to calculate the exemption amount and apply the AMT rate:

Exemption amount = $53,900 for single filers like Robin
AMT rate = 26%

AMT = (AMTI - exemption amount) x AMT rate
AMT = (231,000 - 53,900) x 0.26
AMT = $13,544

Therefore, the answer is B) $13,544.

Question 19

Marvin,the vice president of Lavender,Inc. ,exercises stock options for 100 shares of stock in March 2015.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 2011 and all restrictions on the free transferability had lapsed by the exercise date.
A)If Marvin sells the stock in December 2016 for $3,000,his AMT adjustment in 2016 is a positive adjustment of $800.
B)If Marvin sells the stock in December 2017 for $3,000,his AMT adjustment in 2017 is $0.
C)If Marvin sells the stock in December 2016 for $3,000,his AMT adjustment in 2016 is a negative adjustment of $800.
D)If Marvin sells the stock in December 2017 for $3,000,his AMT adjustment in 2017 is a negative adjustment of $1,000.
E)None of the above.

Accepted Answer

The answer of Marvin,the vice president of Lavender,Inc. ,exercises stock...

Question 20

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 completion method,the income recognized under the contract would have been $60,000.Wallace's AMT effect is:
A)$0.
B)$60,000 negative adjustment.
C)$60,000 positive adjustment.
D)$800,000 positive adjustment.

Accepted Answer

Under the completed contract method, income is not recognized until the contract is completed. Therefore, for regular income tax purposes, no income is recognized on the contract. However, for AMT purposes, income is recognized using the percentage of completion method. Therefore, the $60,000 income recognized under the percentage of completion method would be an adjustment necessary for AMT purposes. Since the income recognized under the percentage of completion method is positive, the adjustment would also be positive. Therefore, the correct choice is C) $60,000 positive adjustment.

Quiz 12: Alternative Minimum Tax

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

Celia and Christian,who are married filing jointly,have one dependent and do not itemize deductions.They have taxable income of $192,000 and tax preferences of $53,000 in 2016.What is their AMT base for 2016?

Akeem,who does not itemize,incurred a net operating loss (NOL) of $50,000 in 2015.His deductions in 2015 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 2015?

Vinny's AGI is $250,000.He contributed $200,000 in cash to the Boy Scouts,a public charity.What is Vinny's charitable contribution deduction for AMT purposes?

Tad and Audria,who are married filing a joint return,have AMTI of $256,000 for 2016.Calculate their AMT exemption.

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:

Mauve,Inc. ,records the following gross receipts in 2014,2015,and 2016. 2014 2015 2016 $4,900,000 $8,700,000 $5,800,000 What is Mauve,Inc.'s TMT in each of these three years? 2014 2015 2016

Use the following data to calculate Jolene's AMTI.Jolene does not itemize deductions. Taxable income $190,000 AMT adjustments Positive 70,000 Negative (14,000) AMT preferences 25,000

In 2016,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?

Arlene,who is single,reports taxable income for 2016 of $112,000.Calculate her alternative minimum tax,if any,given the following additional information. AMT adjustments Positive $22,000 Negative (25,000) Tax preferences 46,000

Use the following selected data to calculate Devon's taxable income prior to any personal exemption taken.Devon does not itemize deductions. Tax preferences $ 45,000 Positive AMT adjustments 52,000 Negative AMT adjustments 15,000 AMTI 290,000

In 2016,Linda incurs circulation expenses of $240,000 which she deducts in calculating taxable income. a.Calculate Linda's AMT adjustment for circulation expenses for 2016,2017,2018,and 2019. b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2016.

Robin,who is a head of household and age 42,provides you with the following information from his financial records for 2015.Robert itemizes deductions. Regular income tax liability $ 41,527 AMT positive adjustments 30,000 AMT preferences 20,000 Taxable income 181,000 Calculate his AMT for 2016.

Quiz 12: Alternative Minimum Tax

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

Celia and Christian,who are married filing jointly,have one dependent and do not itemize deductions.They have taxable income of $192,000 and tax preferences of $53,000 in 2016.What is their AMT base for 2016?

Akeem,who does not itemize,incurred a net operating loss (NOL) of $50,000 in 2015.His deductions in 2015 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 2015?

Vinny's AGI is $250,000.He contributed $200,000 in cash to the Boy Scouts,a public charity.What is Vinny's charitable contribution deduction for AMT purposes?

Tad and Audria,who are married filing a joint return,have AMTI of $256,000 for 2016.Calculate their AMT exemption.

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:

Mauve,Inc. ,records the following gross receipts in 2014,2015,and 2016. 2014 2015 2016 $4,900,000 $8,700,000 $5,800,000 ​ ​ ​ ​ What is Mauve,Inc.'s TMT in each of these three years? ​ 2014 2015 2016

Use the following data to calculate Jolene's AMTI.Jolene does not itemize deductions. Taxable income $190,000 AMT adjustments Positive 70,000 Negative (14,000) AMT preferences 25,000

In 2016,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?

Arlene,who is single,reports taxable income for 2016 of $112,000.Calculate her alternative minimum tax,if any,given the following additional information. ​ AMT adjustments Positive $22,000 Negative (25,000) Tax preferences 46,000

Use the following selected data to calculate Devon's taxable income prior to any personal exemption taken.Devon does not itemize deductions. Tax preferences $ 45,000 Positive AMT adjustments 52,000 Negative AMT adjustments 15,000 AMTI 290,000

In 2016,Linda incurs circulation expenses of $240,000 which she deducts in calculating taxable income. a.Calculate Linda's AMT adjustment for circulation expenses for 2016,2017,2018,and 2019. b.Advise Linda on how she could reduce or eliminate the AMT adjustment in 2016.

Robin,who is a head of household and age 42,provides you with the following information from his financial records for 2015.Robert itemizes deductions. Regular income tax liability $ 41,527 AMT positive adjustments 30,000 AMT preferences 20,000 Taxable income 181,000 ​ Calculate his AMT for 2016.

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

Mauve,Inc. ,records the following gross receipts in 2014,2015,and 2016. 2014 2015 2016 $4,900,000 $8,700,000 $5,800,000 What is Mauve,Inc.'s TMT in each of these three years? 2014 2015 2016

Arlene,who is single,reports taxable income for 2016 of $112,000.Calculate her alternative minimum tax,if any,given the following additional information. AMT adjustments Positive $22,000 Negative (25,000) Tax preferences 46,000

Robin,who is a head of household and age 42,provides you with the following information from his financial records for 2015.Robert itemizes deductions. Regular income tax liability $ 41,527 AMT positive adjustments 30,000 AMT preferences 20,000 Taxable income 181,000 Calculate his AMT for 2016.