Question 1

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 to both regular income tax and the AMT for individual taxpayers.

Question 2

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 3

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

False

Question 4

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 5

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

Accepted Answer

The answer of If circulation expenditures are amortized over a...

Question 6

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

This statement is true. The negative AMT adjustments for the current year are caused by timing differences between regular tax rules and AMT rules. However, these timing differences may have resulted in positive AMT adjustments in prior tax years. Therefore, when calculating the AMT for the current year, the negative adjustments are offset by the positive adjustments from prior years, resulting in a net adjustment to AMT.

Question 7

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

Once personal property is fully depreciated for both regular income tax purposes and AMT purposes, the positive and negative adjustments made for AMT purposes will no longer apply, and will therefore net to zero.

Question 8

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 9

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 answer of If the AMT base is greater than...

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 answer of Assuming no phaseout,the AMT exemption amount for...

Question 11

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 12

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 answer of The AMT can be calculated using either...

Question 13

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 may result in a lower tax liability for regular income tax purposes but may increase the Alternative Minimum Tax (AMT) liability as it is added back as a positive adjustment in calculating the AMT. Therefore, Keosha will have a positive AMT adjustment in 2012.

Question 14

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 15

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 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

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 18

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...

Question 19

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

Accepted Answer

The statement is true. It states that Julia's tentative AMT (Alternative Minimum Tax) is $94,000 and her regular income tax liability is $72,000, which means her AMT is the difference between the two, which equals $22,000.

Question 20

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 accurately represents Congress's motivation for enacting the alternative minimum tax.

Quiz 12: Alternative Minimum Tax