Question 1

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 is a correct statement about the rationale behind enacting the alternative minimum tax.

Question 2

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

False

Question 3

If circulation expenditures are amortized over a ten-year period for regular income tax purposes, there will be no AMT adjustment.

Accepted Answer

For AMT purposes, circulation expenditures must be amortized over a three-year period, not ten, leading to an AMT adjustment.

Question 4

The AMT can be calculated using either the direct or the indirect approaches.Both the tax law and the tax forms use the direct approach.

Accepted Answer

The Alternative Minimum Tax (AMT) is typically calculated using the indirect approach, which involves adjustments and preferences to the regular taxable income, rather than a direct approach.

Question 5

Prior to the effect of tax credits, Wayne's regular income tax liability is $175,000 and his tentative AMT is $150,000.Wayne has nonrefundable business tax credits of $40,000.Wayne's tax liability is $135,000.

Accepted Answer

The information given is not enough to determine Wayne's tax liability after the effect of tax credits. We would need to know the amount of Wayne's eligible tax credits and how they affect both his regular tax liability and tentative AMT.

Question 6

The required adjustment for AMT purposes for pollution control facilities placed in service in 2012 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 7

If the AMT base is greater than $175,000, the AMT rate for an individual taxpayer is the same as the AMT rate for a C corporation.

Accepted Answer

The AMT (Alternative Minimum Tax) rates differ for individuals and C corporations. Individuals have a two-tiered rate system (26% and 28%), while C corporations have a flat AMT rate of 20%.

Question 8

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 9

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.

Accepted Answer

The answer of Moore incurred circulation expenditures of $300,000 in...

Question 10

Assuming no phaseout, the AMT exemption amount for a married taxpayer filing separately for 2012 is less than the AMT exemption amount for C corporations.

Accepted Answer

The AMT exemption amount for a married taxpayer filing separately in 2012 was $36,250, while C corporations had a higher exemption amount of $40,000.

Question 11

Negative AMT adjustments for the current year caused by timing differences are offset by the positive AMT adjustments for prior tax years also caused by timing differences.

Accepted Answer

Negative AMT adjustments for timing differences in the current year can be offset by positive AMT adjustments for timing differences in prior tax years. This is because the AMT system is designed to adjust for differences between regular tax and AMT calculations over time, so the overall impact is meant to be neutralized.

Question 12

Keosha acquires 10-year personal property to use in her business in 2012 and takes the maximum cost recovery deduction for regular income tax purposes. As a result of this, Keosha will have a positive AMT adjustment in 2012.

Accepted Answer

The cost recovery deduction for regular income tax purposes is typically higher than the deduction allowed for alternative minimum tax (AMT) purposes. Therefore, taking the maximum cost recovery deduction for regular tax purposes can result in a positive AMT adjustment, which reduces the taxpayer's ability to claim certain AMT exemptions and deductions.

Question 13

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

After personal property is fully depreciated, the adjustments made for AMT purposes will have fully offset the regular tax depreciation, resulting in a net zero adjustment for AMT purposes.

Question 14

The net capital gain included in an individual taxpayer's AMT base is eligible for the alternative 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 alternative tax rate on net capital gain applies both in regular income tax and the AMT.

Question 15

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 16

Altrice incurs circulation expenditures of $180,000 in 2012.No additional circulation expenditures are incurred in 2013 or 2014.The cumulative adjustment for circulation expenditures for 2012, 2013, and 2014 is $180,000.

Accepted Answer

The answer of Altrice incurs circulation expenditures of $180,000 in...

Question 17

A tax preference can increase or decrease alternative minimum taxable income while an adjustment can only increase alternative minimum taxable income.

Accepted Answer

A tax preference can only increase alternative minimum taxable income, while an adjustment can either increase or decrease it.

Question 18

Julia's tentative AMT is $94,000. Her regular income tax liability is $72,000. Julia's AMT is $22,000.

Accepted Answer

This is true based on the information given. The AMT (Alternative Minimum Tax) liability is calculated separately from the regular income tax liability and is designed to ensure that high-income earners with many deductions and credits still pay a minimum level of tax. In this case, Julia's tentative AMT of $94,000 is higher than her regular income tax liability of $72,000, so she would owe the AMT amount of $22,000 instead.

Question 19

Joel placed real property in service in 2012 that cost $900,000 and used MACRS for regular income tax purposes.He is required to make a positive adjustment for AMT purposes in 2012 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 20

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

Accepted Answer

The answer of If Abby's alternative minimum taxable income exceeds...

Quiz 15: Alternative Minimum Tax