M4 AMT and Other Taxes

Question 1

AMT Calculation.

Answer 1

Regular taxable income
	\+/- Adjustments
	\+Preferences
	------------------------------
	Alternative minimum taxable income

	-----------------------------
	AMT Tax base
	*AMT rate
	-------------------------
	Tentative AMT tax

------------------------------
Tentative minimum tax

---------------------------------
Alternative minimum tax (in addition to regular tax

**PAY GREATER OF: Regular tax OR tentative minimum tax

Question 2

4 Tested Areas of AMT

Answer 2

1) Exemption Amounts / formula
2) Adjustments vs. Preferences
3) AMT credit carryforward period
4) Credits available to reduce AMT

Question 3

Adjustments MNEMONIC (clarify which ones increase OR decrease taxable income and which ones just increase it)

Answer 3

PANIC TIME
P = Passive activity Losses
A = Accelerated depreciation
N = Net operating loss of taxpayer
I = Installment income of a dealer
C = Contracts (% of completion vs. completed)

**THESE may increase or decrease

T = Tax deductions
I = Interest deductions on home equity loans
M = Miscellaneous deductions
E = Exemptions (personal and standard)
**THESE ADD BACK TO taxable income because disallowed by AMT

Question 4

Exemption amount formula.

Answer 4

JOINT EXAMPLE		
			2017 (84,500)
		AMTI
		<160,900>
		--------------
		Excess
		*25%
		---------------	

			-----------------
			AMT Exemption

Question 5

Tax Preference Items (MNEMONIC)

Answer 5

PPP
P = Private activity bond interest income
P = Percentage depletion deduction
P = Pre-1987 accelerated depreciation

*All added back to taxable income

Question 6

Credit for PY minimum tax (AMT Credit) is carried forward how long?

Answer 6

Indefinitely

Question 7

For the Itemized Deductions added back to taxable income for AMT purposes (“TIME” items), clarify which INTEREST (I in TIME) items is not added back

Answer 7

Mortgage interest

*Charitable and those NOT subject to the 2% floor

Question 8

REMINDER* Don’t forget to add back ___

Answer 8

EXEMPTIONS (personal and standard deduction)

Question 9

Credits. Which nonrefundable credits can be used to reduce AMT liability by the full amount? MNEMONIC

Answer 9

"FACCE" it
F = Foreign tax credit
A = Adoption credit
C = Child tax credit
C = Contribution IRA credit
E = Earned Income Credit

Question 10

3 Additional Taxes “Other Taxes”

Answer 10

1) Self-Employment Tax (including additional medicare tax and net investment income tax)
2) Tax Penalty imposed by Affordable Care Act
3) Kiddie Tax

Question 11

Other Taxes - Kiddie Tax 2017 Chart 
Child's Unearned Income                     Tax Rate
0-1,050
1,051-2,100
2,101 and Over

Answer 11

Child’s Unearned Income Tax Rate
0-1,050 0%
1,051-2,100 Child’s rate
2,101 and Over Parent’s Rate