R2- Alternative Minimum Tax

Question 1

What is AMT?

Answer 1

AMT is the excess of the tentative AMT over the regular tax.
it is to ensure that tax payers who take a large number of tax-preferenced deductions pay a minimum amount of tax on their income
pay in addition to regular tax

Question 2

How is AMT calculated?

Answer 2

AMT Income
-AMT Exemption
Taxable AMTI 
x Tax Rate 
26% on first 175000
28% on amount over 175000

Question 3

What is Exemption amount for AMT? Calculation

Answer 3

For-
Single 33500 - 25% (AMTI-112500)
MFJ 45000 - 25%(AMTI-150000)
MFS 22500- 25% (AMTI - 75000)

Question 4

What are the Adjustments for AMTI?

Answer 4

PANICTIMME
May Increase or decrease AMTI
they are timing differences

Question 5

What is PANICTIMME Adjustments for AMTI?

Answer 5

P-Passive Activity Losses
A-Accelerated depreciation
N-Net Operating loss of the individual taxpayer
I-Installment income of a dealer
C-Contracts- % completed vs completed contract
*T-Tax Deductions
*I-Interest deductions on home equity loans
*M-Medical deductions limited to 10% AGI
*M-Misc. Deductions not allowed 2% ones
*E-Exemptions personal and standard deductions

Question 6

What are Tax preference items?

Answer 6

Always addback
*P- Private activity bond interest income
*P- Percentage depletion the excess over adjusted basis of property
P-Pre-1987 accelerated depreciation

Question 7

Credit for Prior Yr minimum tax AMT Credit

Answer 7

1. Offsets regular tax
2. Carryforward forever
3. Limitation on credit-
   PP of PPP
   TIMME of PANICTIMME

Question 8

AMTI Calculation- PANICTIMME RULES- Passive Activity Losses

Answer 8

Addedback or Recalculated

Question 9

AMTI Calculation- PANICTIMME RULES- Accelerated Depreciation adjustment

Answer 9

1. On Real Property- SL 40 yrs placed in service after 1986
2. On personal Property- difference between regular tax and 150% declining balance depreciation
3. No adjustment for property expensed under Sec 179

Question 10

AMTI Calculation- PANICTIMME RULES- Net Operating loss

Answer 10

must be recomputed

Question 11

AMTI Calculation- PANICTIMME RULES- Installment income for dealer

Answer 11

Installment Method may not be used by dealer for property sales

Question 12

AMTI Calculation- PANICTIMME RULES- Contracts

Answer 12

• Long term

- % completion vs completed contract

Question 13

AMTI Calculation- PANICTIMME RULES- Itemized Deductions TIMME

Answer 13

Always adds to Regular Taxable Income
T-Taxes reduced by taxable refunds
I-Interest 
a. Home Equity Interest- add back
b. Investment Interest income recalculated
M-Medical Expenses must exceed 10%AGI not 7.5% difference of 7.5 % and 10% deduction
M-Misc Deductions 2% Ones, not allowed
E-Exemption- Not allowed

Note: Charity is not an addback
Note: Mortgage Interest is OK

Question 14

Tax Preference Items

Answer 14

always adds to regular taxable income
P-Private Activity Bond tax exempt interest
P-Pre-1987 accelerated depreciation on real property and leased personal property
P-Percentage depletion deduction- excess over adjusted basis

Question 15

AMT Credit

Answer 15

FACCE
F-Foreign tax credit
A- Adoption Credit
C-Child Tax Credit
C-Contributions to retirement plans credit
E-Earned Income Credit