Question 1

A taxpayer acquired new equipment to be used in her business this year.For AMT purposes,depreciation must be recalculated using the straight-line method over the same recovery period used for regular tax purposes.

Accepted Answer

Depreciation must be recalculated using the 150% declining balance method.

Question 2

In computing AMTI,tax preference items are
A)excluded.
B)added only.
C)subtracted only.
D)either added or subtracted.

Accepted Answer

B

Question 3

Jake and Christina are married and file a joint return for 2016 with taxable income of $100,000 and tax preferences and adjustments of $20,000 for AMT purposes.Their regular tax liability is $16,533.What is the amount of their total tax liability?
A)$7,121
B)$9,412
C)$16,533
D)$25,945

Accepted Answer

The regular tax liability of $16,533 is the total tax liability since the AMT (Alternative Minimum Tax) is not triggered in this scenario.

Question 4

The itemized deduction phase-out,which has the effect of increasing regular taxable income for high income taxpayers,will also raise AMTI.

Accepted Answer

The AMT adjustment for itemized deductions ignores the regular tax provision limiting the deductible amount of itemized deductions for high-income taxpayers.

Question 5

The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability.

Accepted Answer

The answer of The alternative minimum tax applies to individuals...

Question 6

For purposes of the AMT,the standard deduction,but not the personal and dependency exemptions,is allowed.

Accepted Answer

Neither the standard deduction nor personal and dependency exemptions are allowed for AMT.

Question 7

In 2016 Charlton and Cindy have alternative minimum taxable income of $130,000 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is
A)$0.
B)$8,100.
C)$53,900.
D)$83,800.

Accepted Answer

For 2016, the AMT exemption for married couples filing jointly is $83,800.

Question 8

A taxpayer acquired an office building to be used in her business this year.For AMT purposes,depreciation must be re-calculated using the straight-line method over 40 years.

Accepted Answer

The answer of A taxpayer acquired an office building to...

Question 9

Medical expenses in excess of 10% of AGI are deductible when computing AMT for taxpayers under the age of 65.

Accepted Answer

Medical expenses in excess of 10% of AGI are deductible when computing AMT for taxpayers under the age of 65.

Question 10

For purposes of the AMT,only the foreign tax credit and refundable personal credits are allowed to reduce the tentative minimum tax.

Accepted Answer

The answer of For purposes of the AMT,only the foreign...

Question 11

Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2016 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is
A)$36,225.
B)$47,575.
C)$0.
D)$83,800.

Accepted Answer

The exemption for married filing jointly for the AMT is $83,800. However, the exemption is phased out for taxpayers with AMTI above certain levels. For 2016, the phase-out begins at $543,900. Reva and Josh's AMTI is $350,000, which is below the phase-out threshold. Therefore, their exemption is not phased out and they are entitled to the full $83,800 exemption.

Question 12

In computing the alternative minimum taxable income,no deduction is allowed for
A)alimony.
B)moving expenses.
C)personal exemptions.
D)individual retirement account contributions.

Accepted Answer

Personal exemptions are not allowed as a deduction in the alternative minimum taxable income calculation.

Question 13

Casualty and theft losses in excess of 10% of AGI are deductible for AMT purposes.

Accepted Answer

The AMT provisions do not require an adjustment for casualty and theft losses.

Question 14

A taxpayer who paid AMT in prior years,but is not subject to the AMT in the current year,may be entitled to an AMT credit against his regular tax liability in the current year.

Accepted Answer

If a taxpayer paid AMT in prior years but is not subject to it in the current year, they may be entitled to an AMT credit which can be used to offset their regular tax liability in the current year. This is known as the Minimum Tax Credit.

Question 15

In computing AMTI,adjustments are
A)limited.
B)added only.
C)subtracted only.
D)either added or subtracted.

Accepted Answer

Adjustments in computing AMTI can either be added or subtracted, depending on the type of adjustment being made. For example, depreciation is subtracted from income, while certain tax credits are added to income. Therefore, option D, either added or subtracted, is the best choice.

Question 16

All of the following are allowable deductions under the alternative minimum tax except
A)charitable contributions.
B)gambling losses.
C)qualified housing interest.
D)state income taxes.

Accepted Answer

D)Charitable contributions,qualified housing interest,and gambling losses are all itemized deductions that are allowed for AMT purposes.State income taxes are not.

Question 17

Drake and Davina are married and file a joint return for 2016 with taxable income of $100,000 and tax preferences and adjustments of $51,000 for AMT purposes.Their regular tax liability is $16,533.What is the amount of their total tax liability?
A)$17,472
B)$39,260
C)$34,005
D)$16,533

Accepted Answer

The AMT (Alternative Minimum Tax) is calculated by adding tax preferences and adjustments to taxable income, then applying the AMT exemption and rates. For 2016, the AMT exemption for married filing jointly is $83,800. The AMT income is $151,000 ($100,000 + $51,000). Subtracting the exemption, $67,200 is subject to AMT at 26%, resulting in $17,472. Since this is higher than the regular tax liability, it becomes the total tax liability.

Question 18

An example of an AMT tax preference item is the excess of MACRS depreciation on equipment over depreciation computed by using the the 150% declining balance method.

Accepted Answer

The AMT modification in the question is an adjustment,not a preference item.

Question 19

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her
A)taxable income.
B)alternative minimum tax base.
C)alternative minimum taxable income.
D)tentative alternative taxable income.

Accepted Answer

The answer of Harley's tentative minimum tax is computed by...

Question 20

All tax-exempt bond interest income is classified as an AMT preference.

Accepted Answer

The answer of All tax-exempt bond interest income is classified...

Quiz 14: Special Tax Computation Methods, tax Credits, and Payment of Tax

A taxpayer acquired new equipment to be used in her business this year.For AMT purposes,depreciation must be recalculated using the straight-line method over the same recovery period used for regular tax purposes.

In computing AMTI,tax preference items are

Jake and Christina are married and file a joint return for 2016 with taxable income of $100,000 and tax preferences and adjustments of $20,000 for AMT purposes.Their regular tax liability is $16,533.What is the amount of their total tax liability?

The itemized deduction phase-out,which has the effect of increasing regular taxable income for high income taxpayers,will also raise AMTI.

The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability.

For purposes of the AMT,the standard deduction,but not the personal and dependency exemptions,is allowed.

In 2016 Charlton and Cindy have alternative minimum taxable income of $130,000 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

A taxpayer acquired an office building to be used in her business this year.For AMT purposes,depreciation must be re-calculated using the straight-line method over 40 years.

Medical expenses in excess of 10% of AGI are deductible when computing AMT for taxpayers under the age of 65.

For purposes of the AMT,only the foreign tax credit and refundable personal credits are allowed to reduce the tentative minimum tax.

Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2016 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

In computing the alternative minimum taxable income,no deduction is allowed for

Casualty and theft losses in excess of 10% of AGI are deductible for AMT purposes.

A taxpayer who paid AMT in prior years,but is not subject to the AMT in the current year,may be entitled to an AMT credit against his regular tax liability in the current year.

In computing AMTI,adjustments are

All of the following are allowable deductions under the alternative minimum tax except

Drake and Davina are married and file a joint return for 2016 with taxable income of $100,000 and tax preferences and adjustments of $51,000 for AMT purposes.Their regular tax liability is $16,533.What is the amount of their total tax liability?

An example of an AMT tax preference item is the excess of MACRS depreciation on equipment over depreciation computed by using the the 150% declining balance method.

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her

All tax-exempt bond interest income is classified as an AMT preference.