CHAPTER 15 ALTERNATIVE MINIMUM TAX

1.
Eula owns a mineral property that had a basis of $23,000 at
the beginning of the year. Cost depletion is $19,000. The property qualifies
for a 15% depletion rate. Gross income from the property was $200,000 and net
income before the percentage depletion deduction was $50,000. What is Eula’s
tax preference for excess depletion?
a. $15,000.
b. $23,000.
c. $25,000.
d. $0.
e. None of the above.

2. Which of the
following can produce an AMT preference rather than an AMT adjustment?
a.
Interest on private activity bonds issued in 2013.
b.
Percentage depletion.
c.
Incentive stock options (ISOs).
d.
Only a. and b.
e.
a., b., and c.

3.
Celia and Christian, who are married filing jointly, have
one dependent and do not itemize deductions. They have taxable income of
$82,000 and tax preferences of $53,000 in 2014. What is their AMT base for
2014?
a.
$0.
b.
$77,838.
c.
$94,450.
d.
$150,250.
e.
None of the above.

4.
Robin, who is a head of household and age 42, provides you
with the following information from his financial records for 2014.

Regular income tax liability

$ 42,539

AMT positive adjustments

30,000

AMT preferences

20,000

Taxable income

185,000

Calculate his AMT for 2014.

a. $13,066.

b. $17,825.

c. $42,539.

d. $62,300.

e. None of the above.

5.
Kay, who is single, had taxable income of $0 in 2014. She
has positive timing adjustments of $206,300 and exclusion items of $100,000 for
the year. What is the amount of her alternative minimum tax credit for
carryover to 2015?
a. $80,560.
b. $68,861.
c. $68,288.
d. $12,272.
e. None of the above.

6.
Sand Corporation, a calendar year taxpayer, has alternative
minimum taxable income [before adjustment for adjusted current earnings (ACE)]
of $900,000 for 2014. If Sand’s (ACE) is $975,000, its tentative minimum tax
for 2014 is:
a.
$0.
b.
$56,250.
c.
$180,000.
d.
$191,250.
e.
None of the above.

7. Mauve, Inc., has the
following for 2012, 2013, and 2014 and no prior ACE adjustments.

2012

2013

2014

Pre-adjusted AMTI

$12,000

$15,000

$8,000

Adjusted current earnings

10,000

17,000

5,000

What is the ACE adjustment for
each of the three years?
2012 2013 2014
a. $0 $1,500 ($1,500)
b. ($2,000) $2,000 ($3,000)
c. $2,000 ($2,000) $3,000
d. ($1,500) $1,500 $2,250

e. $1,500 ($1,500) ($2,250)

8. Which of the
following statements is correct?
a.
A C corporation classified as a small corporation is
eligible to have the AMT calculated using the AMT provisions for individuals.
b.
A C corporation classified as a small corporation is notsubject to the AMT.
c.
A C corporation classified as a small corporation is subject
to the AMT only on its adjusted current earnings.
d.
A C corporation classified as a small corporation is
eligible to use the 20%/15%/0% tax rate on net capital gain and qualified
dividends rather than the regular tax rates applicable to other C corporations.
e.
a., b., and c. are correct.

9. Use the following
data to calculate Jolene’s AMTI.

Taxable income

$190,000

AMT adjustments

Positive

70,000

Negative

(14,000)

10.Use the following
selected data to calculate Devon’s taxable income.

Tax preferences $
45,000
Positive AMT adjustments 52,000
Negative AMT adjustments 15,000
AMTI 290,000