Ch. 15: The Alternative Minimum Tax

Question 1

Adjustments for AMTI

Answer 1

can either increase or decrease Alternative Minimum Taxable Income (AMTI)

Question 2

Preferences for AMTI

Answer 2

Always result in addition to AMTI

Question 3

AMT Exemption Phaseout Rule

Answer 3

When a taxpayer’s AMTI begins to exceed the Phaseout Thresholds, the exemption is reduced by 25% of the amount by which the AMTI exceeds the beginning of the phaseout range.

Question 4

How are Adjustments and Preferences classified?

Answer 4

1. Exclusion Items
   or
2. Deferral Items

Question 5

Exclusion Items

Answer 5

Result in a permanent increase in taxation

Question 6

Deferral Items

Answer 6

Result in a tax credit equal to the additional tax that must be paid in the current year. Credit may be carried forward.

Question 7

Interest on Private Activity Municipal Bonds for AMT purposes

Answer 7

Interest earned on private activity municipal bonds is potentially taxable under the Alternative Minimum Tax. The interest must be added back to regular taxable income to arrive at AMTI.

Question 8

Incentive Stock Options for AMT purposes

Answer 8

Exercising ISO may result in the imposition of the AMT. The difference in value of the exercised stock and its strike price must be added to taxable income to arrive at AMTI.

Question 9

How are adjustments to taxable income from ISOs considered/classified?

Answer 9

Deferral Items - may be carried forward.