CHAPTER 15 ALTERNATIVE MINIMUM TAX

1. 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.

a. True

b. False

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

a. True

b. False

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

a. True

b. False

.

4. Since most tax preferences are merely timing differences, they eventually will reverse and net to zero.

a. True

b. False

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

a. True

b. False

6. 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.

a. True

b. False

7. Assuming no phaseout, the AMT exemption amount for a married taxpayer filing separately for 2014 is more than the AMT exemption amount for C corporations.

a. True

b. False

8. If the AMT base is greater than $182,500, the AMT rate for an individual taxpayer is the same as the AMT rate for a C corporation.

a. True

b. False

9. The net capital gain included in an individual taxpayer’s AMT base is eligible for the beneficial alternative tax rate on net capital gain. This favorable alternative rate applies both in calculating the regular income tax and the AMT.

a. True

b. False

10.Business tax credits reduce the AMT and the regular income tax in the same way.

a. True

b. False

11.Prior to the effect of tax credits, Clarence’s regular income tax liability is $200,000 and his tentative AMT is $180,000. Clarence has nonrefundable business tax credits of $35,000. His tax liability is $165,000.

a. True

b. False

12.If Abby’s alternative minimum taxable income exceeds her regular taxable income, she will have an alternative minimum tax.

a. True

b. False

13.Madge’s tentative AMT is $112,000. Her regular income tax liability is $99,000. Madge’s AMT is $13,000.

a. True

b. False

14.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.

a. True

b. False

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

a. True

b. False

16.Paul incurred circulation expenditures of $180,000 in 2014 and deducted that amount for regular income tax purposes. Paul has a $60,000 negative AMT adjustment for 2015, 2016, and for 2017.

a. True

b. False

.

17.Keosha acquires 10-year personal property to use in her business in 2014 and takes the maximum cost recovery deduction for regular income tax purposes. As a result of this, Keosha will have a positive AMT adjustment in 2014.

a. True

b. False

18.Joel placed real property in service in 2014 that cost $900,000 and used MACRS for regular income tax purposes. He is required to make a positive adjustment for AMT purposes in 2014 for the excess of depreciation calculated for regular income tax purposes over the depreciation calculated for AMT purposes.

a. True

b. False