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Chapter 12: ACC 4301

1) In 2014, Ted incurred a net operating loss of $200,000. Ted had no AMT adjustments, but deducted tax preferences of $30,000. What is Ted's ATNOLD carryover into 2015?

A $30,000 B) $230,000 C) $170,000 D) $200,000

2) Black Corporation has average gross receipts of $3,500,000 for the three-year period prior to 2015. Black's AMT base in 2015 is $120,000. What is Black's tentative minimum tax?

A) $31,200 B) $16,000 C) $24,000 D) $0

3) Bill has an AMT base of $400,000 including a net (long-term) capital gain of $30,000 in 2015. What is the AMT tax rate applied to the net (long-term) capital gain?

A) 20% B) 26% C) 28% D) 10%

4) For regular income tax purposes, Andy had net investment income of $30,000 before deducting investment interest. He incurred investment interest of $45,000 during the year. In addition, Andy had interest income on private activity bonds of $12,000. What is Andy's investment interest deduction for AMT purposes?

A. $30,000 B. $12,000 C. $42,000 D. $0

5) Carolyn's taxable income is $300,000. She has tax preferences of $75,000 and positive adjustments of $40,000. If she is a single taxpayer, what is Carolyn's tentative minimum tax?

A. $116,200 B. $112,492 C. $83,000 D. $107,900

6) In the current year, Alberto incurs mine exploration costs of $200,000 that are deducted for regular income tax purposes. What is Alberto's AMT adjustment next year, assuming no additional mine exploration costs are incurred?

A. $20,000 negative B. $40,000 negative C. $0 D. $200,000 positve

7) Paul had $22,000 in interest income from corporate bonds, $14,000 interest income from private activity bonds, and $7,000 from preferred stock. What is the amount of investment income Paul must report for AMT purposes?

a $7,000 b $22,000 C $43,000 d $21,000

8) Amber Corporation (not a small corporation) has adjusted current earnings of $400,000 and the corporation has unadjusted alternative minimum taxable income of $100,000. What is Amber Corporation's ACE (adjusted current earnings) adjustment for the AMT?

a $225,000 positive b $375,000 positive c $75,000 negative d $300,000 negative

9) Sara has total nonrefundable business credits of $20,000, regular tax liability of $66,000, and tentative AMT of $50,000. How much of the nonrefundable credits can Sara claim in the current year?

a $4,000 b $16,000 c $20,000 d $0

10) Verde Corporation (not a small corporation), a calendar year taxpayer, has alternative minimum taxable income (before the ACE adjustment) of $500,000 for 2015. If Verde's adjusted current earnings (ACE) are $1,200,000, what is Verde Corporation's tentative minimum tax for 2015?

a $197,000 b $232,000 c $266,500 d $205,000

11) On nonresidential real property placed in service after December 31, 1998, the AMT depreciation (ADS) is based on a life of how many years?

a 31.5 yearts b 39 years c 40 years d 27.5 years

12) Carol is single and has AMTI of $140,000. What is Carol's 2015 exemption amount for the AMT? Calculate using the 2015 exemption amounts in this study guide.

a $8,437 b $48,400 c $0 d $27,031

13) Roger, a single taxpayer, has taxable income of $110,000. He had positive AMT adjustments of $55,000, negative AMT adjustments of $10,000, and tax preferences of $59,500. What is Roger's AMTI?

a $175,000 b $124,500 c $214,500 d $155,000

14) In the current year, Fern has MACRS depreciation of $30,420 on a nonresidential building placed in service prior to January 1, 1999. Her AMT depreciation under ADS is $23,960. What is AMT depreciation adjustment?

a $23,960 positive b $6,460 negative c $6,460 positive d $30,420 negative

15) Fifty percent of the gain on certain small business stock is excludible from gross income for regular income tax purposes. What percentage of the excluded amount is a tax preference for AMT purposes

a 5% b 7% c 10% d 15%

16) Carolyn's taxable income is $300,000. She has tax preferences of $75,000 and positive adjustments of $40,000. If she is a single taxpayer, what is Carolyn's alternative minimum taxable income?

a $260,000 b $415,000 c $375,000 d $185,000

17) Nora had $22,000 in interest income from corporate bonds, $14,000 interest income from private activity bonds, and $7,000 from preferred stock. She incurred investment interest expense of $12,000 related to the corporate bonds and $9,000 related to the private activity bonds. Nora also incurred $6,000 interest on a home equity loan and used the proceeds to purchase the preferred stock. What is Nora's AMT adjustment for investment interest?

a $9,000 positive b $15,000 positive c $0 d $6,000 positive

18) Which of the following is not allowed as a deduction in computing the alternative minimum tax?

A) Casualty losses

B) Gambling losses (to the extent of winnings)

C) State income taxes

D) Charitable contributions

19) Bob owns a rental duplex. His basis for regular tax purposes is $93,000 while the basis for AMT purposes is $95,000. Bob sells the duplex for $105,000 for a regular income tax gain of $12,000 and an AMT gain of $10,000. What is Bob's AMT adjustment for the sale?

a $2,000 positive b $2,000 negative c $10,000 positive d $10,000 negative

20) Paul had $22,000 in interest income from corporate bonds, $14,000 interest income from private activity bonds, and $7,000 from preferred stock. He incurred investment interest expense of $12,000 related to the corporate bonds and $9,000 related to the private activity bonds. Paul also incurred $6,000 interest on a home equity loan and used the proceeds to purchase the preferred stock. What amount of investment interest can Paul use in calculating his regular tax and his AMT?

a. $27,000; $27,000 b. $12,000; $12,000 c. $12,000; $27,000 d. $18,000; $21,000

21) Beige Corporation (not a small corporation), a calendar year taxpayer, has alternative minimum taxable income (before the ACE adjustment) of $500,000 for 2015. If Beige's adjusted current earnings (ACE) are $1,200,000. What is Beige Corporation's ACE adjustment?

$525,000 negative 350,000 positive 525,000 positive 350,000 negative

22) Larry incurs mine exploration costs of $200,000 that are deducted for regular income tax purposes. What is Larry's adjustment in computing AMTI?

a $0 b $200,000 positive c $180,000 positive d $160,000 negative

23) The AMT credit is available for which of the following differences between regular taxable income and AMTI?

A) Excess percentage depletion

B) Standard deduction

C) Personal exemptions

D) Circulation expenditures

24) Don, age 45, whose AGI is $70,000, incurred medical expenses of $10,000 during the year. What is Don's AMT adjustment, if any, for these medical expenses?

a $0 b $4,750 negative c $1,7500 negative d $1,750 positive

25) Norms taxable income in the current year is comprised of the following amounts:

Adjusted gross income $45,000

Medical expenses $10,000

Other itemized deductions $8,000

Taxable income $27,000

Assuming that Norm is subject to the AMT this year, what is the medical expense adjustment required in the current year?

a $0 b $4,125 positive c $1,125 positive d $2,125 negative

26) The alternative minimum tax ACE adjustment applies to which of the following?

A) C Corporation

B) Individuals

C) Partnerships

D) The ACE adjustment applies to all taxpayers

27) Black Corporation (a calendar year taxpayer) provides you with the following information:

Taxable income $500,000

Interest on private activity bonds (issued in 2005) $60,000

Excess percentage depletion $150,000

Assuming Black Inc. is not a small corporation, what is Blacks AMTI?

a $500,000 b $710,000 c $650,000 d $560,000

28) If Timothy's alternative minimum tax base for 2015 is $292,500, what is his tentative minimum tax liability?

a $78,192 b $81,900 c $58,500 d $76,050

29) D owns mineral property that qualifies for a 15 percent depletion rate. At the beginning of 2015, the basis of the property is $5,000. Gross income from the property during the year was $120,000. What is D's tax preference generated by the property?

A) $0 B) $13,000 C) $18,000 D) $5,000

30) Billy had intangible drilling costs (IDC) of $90,000 for the current year, which he elected to expense. His net oil and gas income for the same period was $70,000. What is Billy's tax preference for IDC?

A) $81,000 B) $9,000 C) $35,000 D) $0

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