Question 1

Paul incurred circulation expenditures of $180,000 in 2017 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for each of 2018,2019,and for 2020.

Accepted Answer

False

Question 2

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

The statement accurately describes Congress's motivation for enacting the alternative minimum tax.

Question 3

Assuming no phaseout,the AMT exemption amount for a married taxpayer filing separately for 2017 is more than the AMT exemption amount for C corporations.

Accepted Answer

For tax year 2017, the AMT exemption amount for married taxpayers filing separately is $84,500, whereas the AMT exemption amount for C corporations is $40,000. Therefore, the AMT exemption amount for married taxpayers filing separately is more than the AMT exemption amount for C corporations.

Question 4

The net capital gain included in an individual taxpayer's AMT base is eligible for the lower 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 net capital gain included in an individual taxpayer's AMT base is eligible for the lower tax rate on net capital gain, and this applies to both the regular income tax and the AMT.

Question 5

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes,there will be an AMT adjustment.

Accepted Answer

Circulation expenditures are subject to AMT adjustment unless they are amortized over a three-year period for regular income tax purposes.

Question 6

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 7

AMT adjustments can be positive or negative,whereas AMT preferences are always positive.

Accepted Answer

This statement is true. AMT adjustments can be positive or negative, meaning they either increase or decrease taxable income for AMT purposes. AMT preferences, on the other hand, are always positive and add to taxable income for AMT purposes.

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

A taxpayer who expenses circulation expenditures in the year incurred for regular income tax purposes will have a positive AMT adjustment in the following year.

Accepted Answer

Circulation expenditures are not deductible for AMT purposes, so there would be no AMT adjustment in the following year.

Question 10

Keosha acquires used 10-year personal property to use in her business in 2017 and uses MACRS depreciation for regular income tax purposes.As a result,Keosha will incur a positive AMT adjustment in 2017,because AMT depreciation is slower.

Accepted Answer

AMT depreciation is based on the straight-line method, which is slower than the MACRS method used for regular income tax depreciation. Therefore, Keosha will incur a positive AMT adjustment in 2017 due to the slower depreciation schedule used for AMT.

Question 11

If Abby's alternative minimum taxable income exceeds her regular taxable income,she will incur an alternative minimum tax.

Accepted Answer

The answer of If Abby's alternative minimum taxable income exceeds...

Question 12

Negative AMT adjustments for the current year caused by timing differences are offset by the positive AMT adjustments in prior tax years also caused by timing differences.

Accepted Answer

This is correct. Negative AMT adjustments for the current year caused by timing differences are added back to taxable income to calculate AMT, but they will be offset by any positive AMT adjustments in prior tax years also caused by timing differences. This is known as the AMT credit, and it reduces the taxpayer's overall AMT liability.

Question 13

If the AMT base is greater than $187,800,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 14

Prior to consideration of tax credits,Clarence's regular income tax liability is $200,000 and his tentative minimum tax (TMT) is $180,000.Clarence holds nonrefundable business tax credits of $35,000.His tax liability is $165,000.

Accepted Answer

The answer of Prior to consideration of tax credits,Clarence's regular...

Question 15

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 16

Madge's tentative minimum tax (TMT) is $112,000.Her regular income tax liability is $99,000.Madge's AMT is $13,000.

Accepted Answer

Madge's AMT ($13,000) is higher than her regular income tax liability ($99,000), meaning she would be subject to paying the higher amount under AMT guidelines. Therefore, her AMT of $13,000 plus her regular income tax liability of $99,000 would equal her total tax liability of $112,000, which is her tentative minimum tax (TMT).

Question 17

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

This statement is true. When personal property is fully depreciated for both regular income tax purposes and AMT purposes, any positive and negative adjustments that were made for AMT purposes will be offset and result in a net zero adjustment.

Question 18

Joel placed real property in service in 2017 that cost $900,000 and used MACRS depreciation for regular income tax purposes.He is required to make a positive adjustment for AMT purposes in 2017 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 19

The required adjustment for AMT purposes for pollution control facilities placed in service this year is equal to the difference between the amortization deduction allowed for regular income tax purposes and the depreciation deduction computed under ADS.

Accepted Answer

The answer of The required adjustment for AMT purposes for...

Question 20

The AMT calculated using the indirect method will produce a different amount than the AMT calculated using the direct method.

Accepted Answer

The AMT (Alternative Minimum Tax) calculated using both the indirect and direct methods should be the same. The indirect method adds back certain tax preferences and adjustments to regular taxable income, while the direct method applies a flat tax rate to adjusted AMT income. Both methods should result in the same tax liability.

Quiz 15: Alternative Minimum Tax