REG 2 - AMT and Other Taxes

Question 1

What is an exemption amount for AMT. How do you calculate exemption amounts?

Answer 1

• An amount a taxpayer is allowed to deduct from alternative minimum taxable income before calculating AMT liability.

Single:
$54,300 - [25% x (AMTI - $120,700)]

MFJ
$84,500 - [25% x (AMTI -$160,900)]

E.g. Bob and Mary file a joint return with an AMTI of $258,900

$84,500 - [25% x ($258,900 - $160,900)] = 60,000

Question 2

Define the adjustments that are either added or subtracted for AMT? PANIC

Answer 2

P - Passive activity losses are added back, or recalculated.
A - Accelerated depreciation is adjusted
N - Net operating losses are recomputed
I - Installment method may not be used by dealer for property sales
C - Contracts (long-term) have to be recalculated

Question 3

What are the itemized deductions that ADD to regular taxable income for AMT? TIME

Answer 3

T - Taxes (reduced by taxable refunds) are added back
I - Interest:
1) Mortgage interest NOT used to buy, build, or improve dwelling is ADDED BACK
2) Home mortgage is OK
M - Medical expenses - N/X
M - Miscellaneous deductions subject to 2% floor are ADDED BACK
E - Exemptions - personal and standard deductions may not be claimed.

Question 4

What are the tax preference items that are ADDED BACK? PPP

Answer 4

P - Private activity bond interest income (on certain bonds is added back
P - Percentage depletion deduction (excess over adjusted basis of property is added back)
P - Pre-1987 accelerated depreciation is added back

Question 5

How long can allowable AMT paid in taxable year be carried forward?

Answer 5

Credit for prior year minimum tax can be carried forward FOREVER against regular income tax.

Question 6

What are the credits that are allowed to reduce AMT? FACCE

Answer 6

F - Foreign tax credit
A - Adoption credit
C - Child and dependent care credit
C - Contribution to IRA credit
E - Earned income credit

Question 7

Define net investment income tax?

Answer 7

3.8% tax on interest, dividends, capital gains, rental, and royal income on amounts greater than $250,000 for a filing status of married.

Question 8

Define kiddie tax?

Answer 8

Children under the age of 18 use following tax rates on interest and dividend income:

$0 - $1,050 - 0%
$1,050 - $2,100 - Child’s tax rate
$2,101 and over - Parent’s tax rate