ITX - 39 Flashcards
(39.1) The AMT is a separate method for computing taxable income with different ___.
rates and exemption
(39.1) The AMT is computed after the regular tax liability, and the taxpayer always pays the ___ amount.
higher
(39.1) To compute the AMTI, a taxpayer begins with ___, as computed for the regular tax, and then recalculates for ___.
- AGI
- adjustments and preferences
(39.2) All the taxes and miscellaneous itemized deduction that are allowed in the calculation of the regular tax are not allowed as deductions FROM ___.
AMTI
(39.2) Depreciation using AMT rules: In general, the difference between the deductions using accelerated methods under MACRS and those using straight-line methods will be ___ to determine the AMTI.
added to AGI
(39.2) Depreciation using AMT rules: For ___ placed in service during 1999 or later, the difference between the AMT and the regular depreciation is eliminated. For all other assets, the difference in depreciable lives for the regular and AMT purposes is eliminated, and assets subject to ___ under MACRS are depreciated using the ___ method for AMT purposes.
- real property
- accelerated depreciation (200 DB)
- 150 DB
(39.2) AMT depreciation may be ___ in earlier years of an asset’s life. In later years, the AMT depreciation will be ___ and can be used to offset lower depreciation on newer assets or ___ AMTI.
- lower
- higher
- lower
(39.2) AMT preferences and adjustments: ___ interest on certain ___ bonds issued after Aug. 7, 1986 and before 2009 or after 2011.
- Add
- private activity
(39.3) AMT preferences and adjustments: ___% of the gain on qualified small business stock that may be excluded for regular tax purposes must be ___ back to AMTI - half of the gain can be excluded for regular tax, so ___% of the gain is added for AMTI.
- 7%
- added
- 3.5%
(39.3) AMT preferences and adjustments: The ___ (the difference between the exercise price and the market price of the employer’s stock) with regard to ____ stock options is added to AMTI when the taxpayer exercises the options.
- bargain element
- incentive
(39.3) AMT tax adjustments
- Excess depreciation (accelerated over straight-line)
- Excess of market price over exercise price for incentive stock options (the “bargain element”)
(39.3) AMT tax preferences
- 7% of gain on small business stock
- Tax-exempt interest on private activity municipal bonds
(39.3) AMT exemptions are reduced by ___% of the excess AMTI over certain amounts
25%
(39.3) AMT exemption: If a taxpayer is a child under the age of 19 (24 if a student) who is subject to the kiddie tax rules, the child’s exemption amount may not exceed the child’s earned income plus $___.
$7,250
(39.4) ___ exemptions are not deducted for the AMT
Personal
(39.4) The ___ deduction is not available for AMT
standard
(39.4) The deduction for property and state income taxes and all ___ deductions are unavailable for the AMT.
miscellaneous
(39.4) Interest from ___ not used to purchase, build, or remodel the taxpayer’s home is not deductible for the AMT.
home equity debt
(39.4) ___ deductions are not reduced by 3% of AGI above the phaseout levels, as with the regular income tax.
Itemized deductions
(39.4) The interest on ___ bonds that is exempt from regular income tax is included in the calculation of the AMT.
private activity municipal
(39.5) Itemized deductions under regular income tax: Medical
if over 10% of AGI
(39.5) Itemized deductions under AMT: Medical
if over 10% of AGI
(39.5) Itemized deductions under regular income tax: State Taxes
deductible
(39.5) Itemized deductions under AMT: State Taxes
not deductible
(39.5) Itemized deductions under regular income tax: Interest
- qualified residence
- investment expense
(39.5) Itemized deductions under AMT: Interest
- not for home equity funds used for expenses other than the primary residence
- investment expense
(39.5) Itemized deductions under regular income tax: Gifts to Charity
deductible
(39.5) Itemized deductions under AMT: Gifts to Charity
deductible
(39.5) Itemized deductions under regular income tax: Casualty Losses
deductible
(39.5) Itemized deductions under AMT: Casualty Losses
deductible
(39.5) Itemized deductions under regular income tax: 2% Miscellaneous
deductible
(39.5) Itemized deductions under AMT: 2% Miscellaneous
not deductible
(39.5) After subtracting the ___, AMT is calculated at __% of the first $182,5000 of AMTI ($91,250 for MFS) and __% of all AMTI over that amount
- exemption
- 26%
- 28%
(39.6) Any AMT paid in a given year due to the ___ will create a credit that can be used to offset regular tax in future years, when the regular tax is higher than AMT tax
deferral (not the elimination) of deductions or the acceleration of income
(39.6) Corporate AMT applies to ___ corporations, not ___ corporations.
C not S
(39.6) C corporations use an exemption amount of $___ and a rate of ___% after calculating AMTI. The exemption amount is reduced by ___% of the amount by which AMTI exceeds $___.
$40,000
20%
25%
$150,000
(39.6) To calculate AMTI for a corporation, the corporation’s income is increased by ___% of adjusted current earnings (ACE).
75%
(39.7) Corporate AMT: The ___ deduction is not allowed.
dividends received
(39. 7) Small Corporations exempt from AMT:
- Under $__ in average receipts for 3 years or first year
- Under $__ if fewer than 3 years in existence
$7.5 million
$5 million
(39.7) Accelerating deductions will be counterproductive if the taxpayer pays __ taxes in advance.
real estate or state income taxes
(39.7) In general, a taxpayer facing the possibility of being subject to the AMT should ___, which will increase the ___ income tax for the current year and possibly avoid the AMT.
- accelerate income and defer deductions
- regular
(39.7) To reduce AMT, buy ___ bonds instead of ___ bonds; postpone exercising ___ options.
- public purpose municipal
- private activity
- incentive stock
(39.7) For AMT purposes, the ___ is included in income when the option is exercised.
bargain element
(39.7) The difference between the option price and the market price
bargain element
(39.7) ISO: The amount recognized for the AMT is ___ to the stock’s basis for the calculation of future gains.
added
(39.7) ISO: Selling the stock acquired within a year of exercising an ISO will cause the whole gain to be taxable as ___ income and avoid ___.
- ordinary
- AMT treatment
(39.8) ISO: Capital gain: __ years and before from the date of the grant and __ year after the date of exercise
- 2
- 1
(39.8) ISO: AMT is due ___.
upon exercise
(39.8) AMT credit due to ISOs: Credit of up to __% of the AMT credit carryforward generated at least __ years earlier. However, if a taxpayer has an AMT credit carryforward of less than $___, the taxpayer can claim the lesser of $___ or ___% of the credit each year. (2007-2011).
- 20% three - $25,000 - $5,000 - 100%
