Individual Taxation 5 of 5 (5)

Question 1

Tentative Minimum Tax

Answer 1

The minimum amount of tax that must be paid by a taxpayer based on multiplying the alternative minimum taxable income (AMTI) by 26% up to a certain amount, and 28% on the excess.

Question 2

AMT Tax Preferences for Individuals

Answer 2

Additional items that are added to regular taxable income in computing AMTI due to their preferential tax treatment for regular tax purposes (P):

• Private activity bond interest is fully taxable (private activity interest). Private activity bonds are used to finance nongovernmental activities, such as industrial development, student loans and low-income housing.

Question 3

AMT Tax Adjustments for Individuals

Answer 3

Income or expense items computed differently for AMT vs. regular tax; therefore, they can increase or decrease AMTI for purposes of computing AMT. These include (LIERS):

Local and state and income taxes, all property taxes, and sales taxes paid are not deductible.

Incentive stock options are taxed when exercised for the difference between the exercise price and market price of the stock.

Excess depreciation on personal property over 150% declining balance when double-declining balance was used for regular tax purposes.

Refunds of local and state taxes paid that were included in income for regular tax purposes should be taken out of income for AMT purposes.

Standard deduction may not be claimed.