AMT

Question 1

Exemption Formula

Answer 1

AMTI
(Threshold)
------------------
Excess over threshold
x 25%
-----------------
Reduction 

Full exemption - reduction = Exemption taken

Question 2

Adjustments pneumonic

Answer 2

PANIC - Can increase or decrease AMTI

TIMME - only increase AMTI

Question 3

PANIC

Answer 3

Passive activity losses
Accelerated depreciation 
Net operating loss
Installment income of dealer
Contracts

Question 4

TIMME

Answer 4

Tax deductions
Interest deductions on some home equity loans
Medical deductions
Miscellaneous deductions not allowed
Exemptions (personal) and standard

Question 5

Passive activity losses

Answer 5

Added back or recalculated

Question 6

NOL

Answer 6

Must be recomputed

Question 7

Installment method

Answer 7

not allowed for property sales under AMT. Must be recomputed.

Question 8

Contracts

Answer 8

AMT requires percentage completed method. Completed contract method must be recalculated.

Question 9

Taxes reduced by taxable refunds

Answer 9

added back

Question 10

Interest

Answer 10

Mortgage interest not used to build, buy, or improve is added back.

Investment interest expense recalculated

Question 11

Medical expenses

Answer 11

Medical expenses in excess of 10% AGI that were deducted for regular tax are added back to increase AMT

Question 12

Miscellaneous deductions subject to 2% floor

Answer 12

Not allowed. Increase AMT

Question 13

Exemptions

Answer 13

Personal and standard deductions not allowed. Increase AMT.

Question 14

Tax Preference Items

Answer 14

Always increase AMT.

Private activity bond tax-exempt interest
Pre-1987 accelerated depreciation on real property and leased
Percentage depletion (excess over adj basis of property)

Question 15

Private activity bond tax-exempt interest

Answer 15

Add back to increase AMT.

Preference item

Question 16

Pre-1987 accelerated depreciation

Answer 16

Add back to increase AMT.

Preference item

Question 17

Percentage depletion deduction

Answer 17

Add back to increase AMT.

Preference item

Question 18

AMT Credits

Answer 18

Reduce AMT liability by full amount of credits

FACCE

Foreign tax credit
Adoption credit
Child tax credit
Contributions to retirement plans credit
Earned income credit

Question 19

What is the AMT exemption threshold.

Answer 19

$150,000 AMTI

Reduce the $40,000 exemption by 25% of AMTI over $150,000 (completely phased out at $310,000 AMTI).