Which one of the following is not a tax preference item used in computing the alternative minimum tax for an individual?
A)Tax-exempt income from a Colorado Water Board bond
B)Percentage depletion in excess of cost depletion on a silver mining property
C)Tax-exempt interest on specified private activity bonds in tax years after 2012
D)Exclusion of gain on the sale of certain qualified small business corporation stock in tax years after 2012
E)None of the above; all are preference items.

Question

Quizplus · Accepted Answer

Tax-exempt income from a Colorado Water Board bond is generally not considered a tax preference item for the purpose of calculating the Alternative Minimum Tax (AMT) for an individual. The AMT is designed to ensure that taxpayers with substantial income cannot use certain exclusions, deductions, or credits to pay little or no federal income tax. However, interest from municipal bonds, such as those issued by a Colorado Water Board, is typically exempt from federal income tax and is not added back as a preference item when calculating AMT.

Which One of the Following Is Not a Tax Preference