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Exam 17: Business Tax Credits and the Alternative Minimum Tax

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Question 51

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Joel placed real property in service in 2018 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 2018 for the excess of depreciation calculated for regular income tax purposes over the depreciation calculated for AMT purposes.

A) True
B) False

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Question 52

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On February 1, 2018, Omar acquires used 7-year personal property for $100,000 for use in his business.Omar does not elect § 179 expensing, but he does take the maximum regular cost recovery deduction.As a result, Omar incurs a positive AMT adjustment in 2018 of what amount?

A) $0
B) $3,580
C) $10,710
D) $14,290
E) None of the above

F) None of the above
G) B) and D)

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Question 53

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Interest income on private activity bonds issued in 2015, reduced by expenses incurred in carrying the bonds, is a preference item that is included in computing AMTI.

If the AMT base is greater than $191,100, the AMT rate for an individual taxpayer is the same as the AMT rate for married taxpayer, filing jointly.

For regular income tax purposes, Yolanda, who is single, is in the 32% tax bracket.Her AMT base is $420,000.Her tentative AMT is:

The disabled access credit was enacted to encourage small businesses to make their businesses more accessible to disabled individuals.

Black Company paid wages of $180,000, of which $40,000 was qualified wages for the work opportunity tax credit under the general rules.Black Company's deduction for wages for the year is:

Ahmad is considering making a $10,000 investment in a venture which its promoter promises will generate immediate tax benefits for him.Ahmad, who normally itemizes his deductions, is in the 28% marginal tax bracket.If the investment is of a type where the taxpayer may claim either a tax credit of 25% of the amount of the expenditure or an itemized deduction for the amount of the investment, what treatment normally would be most beneficial to Ahmad and by how much will Ahmad's tax liability decline because of the investment?

The tax benefit received from a tax credit is never affected by the tax rate of the taxpayer.

Assuming no phaseout, the AMT exemption amount for a married taxpayer filing separately for 2018 is the same as the AMT exemption amount for married taxpayer filing jointly filing status.

Melinda is in the 35% marginal regular tax bracket.She reports a net capital gain of $150,000 on the sale of land which is eligible for the lower tax on net capital gain in calculating the regular income tax.Discuss the tax rate that applies to the $150,000 net capital gain in calculating the tentative minimum tax TMT) for Melinda.

The purpose of the tax credit for rehabilitation expenditures is to encourage the relocation of businesses from older, economically distressed areas i.e., inner city) to newer locations.

Keosha acquires used 10-year personal property to use in her business in 2018 and uses MACRS depreciation for regular income tax purposes.As a result, Keosha will incur a positive AMT adjustment in 2018, because AMT depreciation is slower.

In the current tax year, Ben exercised an incentive stock option ISO), acquiring stock with a fair market value of $190,000 for $170,000.As a result, his AMT basis for the stock is $170,000, his regular income tax basis for the stock is $170,000, and his AMT adjustment is $0 $170,000 - $170,000).

In 2018, Glenn recorded a $108,000 loss on a passive activity.None of the loss is attributable to AMT adjustments or preferences.She has no other passive activities.Which of the following statements is correct?

The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.

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

After personal property is fully depreciated for both regular income tax purposes and AMT purposes, no AMT adjustment will be required as a result of the sale of the property.

Qualified research and experimentation expenditures are not only eligible for the 20% tax credit, but also can be expensed in the year incurred.

The AMT adjustment for mining exploration and development costs can be avoided if the taxpayer elects to deduct the expenditures in the year incurred for regular income tax purposes, rather than writing off the expenditures over a 10-year period for regular income tax purposes.