Chapter 14 Questions

Question 1

Theft & casualty losses are not tax-preference items for purposes of the AMT.

Answer 1

True. Tax-preference items are not deductible under AMT. Theft and casualty losses are deductible with AMT.

Question 2

The standard deduction is added to taxable income to compute the AMT for taxpayers who took the standard deduction.

Answer 2

True. The standard deduction is a tax-preference item for AMT.

Question 3

Charitable contributions are not a tax-preference item for purposes of the AMT.

Answer 3

True. Tax-preference items are not deductible for the AMT. Charitable contributions are deductible for AMT.

Question 4

Medical expenses of a 60 year old taxpayer in excess of 10% of AGI are used in computing the AMTI.

Answer 4

True. Medical expenses in excess of 10% of AGI are deductible for AMT.

Question 5

The AMT rates are identical for individuals and corporations.

Answer 5

False. Corporations do not have AMT.

Question 6

Private purpose municipal bonds are a tax-preference item for the AMT.

Answer 6

True. Private purpose muni bonds are a tax-preference item; public-purpose muni bonds are not.

Question 7

The AMT exemption increases as the AMTI of a taxpayer increases.

Answer 7

False. The exemption decreases as AMTI increases, until it is completely phased out.

Question 8

The nominal AMT rate for an individual is 20%.

Answer 8

False. The nominal AMT rate is either 26% or 28%.

Question 9

Corporations are exempt from the AMT only if gross receipts are

Answer 9

False. As of 2018, all corporations are exempt from AMT.