Prior to the effect of the tax credits,Justin's regular income tax liability is $200,000 and his tentative AMT is $195,000.Justin has the following credits:
Child tax credit $1,000
Adoption expenses credit 5,000
Calculate Justin's tax liability after credits.
A)$190,000
B)$194,000
C)$195,000
D)$200,000
E)None of these

Question

Quizplus · Accepted Answer

Justin's regular income tax liability after tax credits is $194,000 ($200,000 - $6,000).His tentative AMT appears to be $195,000,since generally nonrefundable credits are not permitted in calculating tentative AMT.However,a special provision permits these tax credits to offset both the regular income tax liability and the AMT.Thus,Justin's tax liability is $194,000.

Prior to the Effect of the Tax Credits,Justin's Regular Income