Chapter 15 MC

Question 1

The alternative minimum tax (AMT) is imposed on alternative minimum taxable income (AMTI) in excess of any applicable exemption amount. What tax rate is applied to the first $175,000 of the AMT base (or tentative minimum taxable income) of individual taxpayers?

Answer 1

26 percent

The individual AMT rate is 26 percent on the first $175,000.

Question 2

Which of the following statements concerning the small corporation exemption under the alternative minimum tax is (are) correct?. I. To qualify for the exemption, the corporation must have no more than five shareholders. II. To qualify for the exemption, a new corporation must have average annual gross receipts of $5 million or less for its first 3 taxable years.

Answer 2

(B) II only

I is incorrect because there is no requirement concerning the number of shareholders in the corporation.

Question 3

All the following statements concerning the alternative minimum tax (AMT) are correct EXCEPT

Answer 3

Each individual taxpayer has an exemption amount for AMT purposes that is unaffected by the amount of the taxpayer’s AMTI.
The amount of an individual taxpayer’s exemption is reduced when a taxpayer’s AMTI reaches a specified dollar amount.

Question 4

All the following statements concerning the calculation of an individual taxpayer’s alternative minimum taxable income (AMTI) are correct EXCEPT

Answer 4

(B) Charitable contributions deducted in determining the regular income tax are added back to taxable income in calculating AMTI.
(B). Charitable contributions are deductible in computing AMTI.

Question 5

All the following statements concerning the alternative minimum tax (AMT) are correct EXCEPT

Answer 5

A) Medical expenses in excess of 7.5 percent of adjusted gross income are deductible in computing alternative minimum taxable income.
(A). The medical expense “floor” for AMT purposes is 10 percent.