Question 1

In May 2013, Cindy incurred qualifying rehabilitation expenditures of $500,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures.In March 2017, she sold the building at a loss.Calculate the rehabilitation expenditures credit recapture that she must report in 2017.

Accepted Answer

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Question 2

During 2017, Red Corporation (a calendar year taxpayer) has $4,000,000 of taxable income and the following transactions: ? $\begin{array}{ll}
\text { AMTI (not including adjusted current earnings) } & \$ 5,000,000 \
\text { Adjusted current earnings } & 8,000,000
\end{array}$ Red Corporation's alternative minimum tax (AMT) for 2017 is:

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Question 3

What is the relationship between taxable income and AMTI?

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Question 4

In 2017, Job Corporation, a calendar year taxpayer, has AMTI (before adjustment for adjusted current earnings) of $7 million.If Job Corporation's ACE is $16 million, its tentative minimum tax for 2017 is:

Accepted Answer

The tentative minimum tax is calculated by taking 20% of the AMTI after adjustments. The ACE adjustment is 75% of the difference between ACE and AMTI, which is $6.75 million. Adding this to the AMTI gives $13.75 million, and 20% of that is $2.75 million.

Question 5

Summer Corporation's business is international in scope and is subject to income taxes in several countries.Summer's earnings and income taxes paid in the relevant foreign countries are: $$\begin{array} { l r r } 
\text { Country } & \text { Income } & \text { Taxes } \
\text { A } & \$ 1,000,000 & \$ 500,000 \
\text { B } & 300,000 & 30,000 \
\text { C } & 400,000 & \underline { 120,000 } \
\text { Total } & \$ 1,700,000 & \$ 650,000 \
\hline
\end{array}$$ ​
If Summer Corporation's worldwide income subject to taxation in the United States is $2,400,000 and the U.S.income tax due prior to the foreign tax credit is $816,000, compute the allowable foreign tax credit.If, instead, the total foreign income taxes paid were $550,000, compute the allowable foreign tax credit.

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Question 6

Durell owns a construction company that builds residential housing.The company is eligible to use the completed contract method for regular income tax purposes.What can Durell do to minimize his AMT?

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Question 7

Explain the purpose of the disabled access credit and describe the general characteristics of its computation.

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Question 8

How can the positive AMT adjustment for research and experimental expenditures be avoided?

Accepted Answer

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Question 9

Steve records a tentative general business credit of $110,000 for the current year.His net regular tax liability before the general business credit is $125,000, and his tentative minimum tax is $100,000.Compute Steve's allowable general business credit for the year.

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Question 10

How can an AMT adjustment be avoided by a taxpayer who incurs circulation expenditures in the current tax year?

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Question 11

Use the following selected data to calculate Devon's taxable income prior to any personal exemption taken.Devon itemizes deductions. $$\begin{array} { l r } 
\text { Tax preferences } & \$ 45,000 \
\text { Positive AMT adjustments } & 52,000 \
\text { Negative AMT adjustments } & 15,000 \
\text { AMTI } & 290,000
\end{array}$$

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

Question 12

Why is there a need for a second tax system called the alternative minimum tax?

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Question 13

Melinda is in the 35% marginal regular tax bracket.She reports a net capital gain of $150,000 on the sale of land which is eligible for the lower tax on net capital gain in calculating the regular income tax.Discuss the tax rate that applies to the $150,000 net capital gain in calculating the tentative minimum tax (TMT) for Melinda.

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Question 14

Tanver Corporation, a calendar year corporation, has alternative minimum taxable income of $7 million in 2017 (before adjustment for adjusted current earnings).If Tanver's adjusted current earnings is $16 million, its tentative minimum tax for 2017 is:

Accepted Answer

Tentative minimum tax for 2017 can be calculated as follows:
10% * ($7 million - $40,000) + 15% * ($16 million - $7 million) = $700,000 + $1,350,000 = $2,050,000
However, the tentative minimum tax cannot be less than 20% of the excess of alternative minimum taxable income over $2 million. In this case, the excess is $5 million ($7 million - $2 million), so the minimum tax under this rule is $1 million (20% * $5 million). Therefore, the tentative minimum tax for Tanver Corporation in 2017 is $2,750,000 (the higher of the two amounts calculated). Therefore, the best choice is B.

Question 15

Golden Corporation is an eligible small business for purposes of the disabled access credit.During the year, Golden makes the following expenditures on a structure originally placed in service in 1988. $$\begin{array} { l r } 
\text { Removal of architectural barriers } & \$ 8,500 \
\text { Acquired equipment for disabled persons } & 6,250 \
\hline &14,750
\end{array}$$ ​
In addition, $8,000 was expended by Golden on a building originally placed in service in the current year to ensure easy accessibility by disabled individuals.Calculate the amount of the disabled access credit available to Golden Corporation.

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Question 16

In determining the amount of the AMT adjustments, discuss the difference in the treatment of a building placed in service after 1986 and before 1999 and a building placed in service after December 31, 1998.

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Question 17

Ford Corporation, a calendar year corporation, has alternative minimum taxable income (before any exemption) of $1.28 million for 2017.The company is not a small corporation.If the regular corporate tax is $209,000, Ford's alternative minimum tax for 2017 is:

Accepted Answer

The alternative minimum tax (AMT) is calculated as 20% of the alternative minimum taxable income (AMTI) for corporations. Therefore, 20% of $1.28 million is $256,000. The AMT is the excess of the tentative minimum tax over the regular tax, which is $256,000 - $209,000 = $47,000.

Question 18

Explain the purpose of the tax credit for rehabilitation expenditures and describe the general characteristics of its computation.

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Question 19

What is the relationship between the regular income tax liability and the TMT?

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Question 20

Discuss the treatment of unused general business credits.

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Quiz 17: Tax Credits and Corporate Alternative Minimum Tax