R2-M4

Question 1

Kiddie tax

Answer 1

-Child’s net unearned income is taxed @ parent’s rate

Net unearned income= Child’s total unearned income- standard deduction(0 tax)-additional deduction amt(taxed @child rate)

Question 2

Adjustments for AMTI Calculation

Answer 2

(PANIC TIME):

• Passive activity losses
• Accelerated depreciation
• Net operating loss
• Installment income of dealer
• Contracts (long term)

Itemized deductions (always add back):

• Tax deductions
• Interest deductions (home mortgage is OK)
• Miscellaneous deductions subject to 2% floor
• Exemptions (personal and standard deduction)

Question 3

AMT Calculation

Answer 3

Regular taxable income 
\+/- Adjustments
\+Preferences 
=AMTI
-AMT Exemption
=AMT base
*AMT rate
=Tentative AMT tax
-AMT foreign tax credit
=Tentative minimum tax
-Regular income tax
=Alternative minimum tax

Question 4

AMTI tax preferences

Answer 4

• Private activity bond tax-exempt interest
• Pre- 1987 accelerated depreciation
• Percentage depletion

Question 5

Credit for prior yr AMT liability is carried:

Answer 5

Forward indefinitely

Question 6

AMT tax rate for individuals

Answer 6

26% and 28%