Corporation Taxation - AMT

Question 1

The starting point of computing a corporations AMTI is ____

Answer 1

It’s regular taxable income

Question 2

Regular taxable income is ______ by tax preferences and ______ by specified adjustments

Answer 2

Increased

Increased/Decreased

Question 3

T/F

One tax preference that must be added to a corporation’s regular taxable income is the amount of tax-exempt interest from private activity bonds

Answer 3

TRUE

Question 4

One adjustment that must be made to convert regular taxable income to AMTI is the adjustment for depreciation on personal business property placed in service after _____

Answer 4

1986

Question 5

For AMT purposes, depreciation on 5-year property must be computed using the _____ declining balance method

Answer 5

150%

Question 6

Because for AMT purposes, depreciation on 5-year property must be computed using the 150% declining balance method, a corporation that uses the 200% declining balance method will have depreciated more for regular tax purposes than what is allowed for AMT purposes. What does this mean?

Answer 6

The additional depreciation over what AMT allows will have to be added back to regular taxable income to arrive at AMTI.

Question 7

If a corporation’s tentative minimum tax exceeds the regular tax, the excess amount is ______

Answer 7

Payable in addition to the regular tax

Question 8

T/F

A corporation’s tax preference items that must be taken into account for AMT purposes includes use of the percentage-of-completion method of accounting for long-term contracts

Answer 8

FALSE

It is the excess of income under the percentage-of-completion method over the amount reported using the completed-contract method that is a positive adjustment in computing AMT

Question 9

T/F

A corporation’s tax preference items that must be taken into account for AMT purposes includes casualty losses

Answer 9

FALSE

A deduction for casualty losses is allowed in the computation of AMT

Question 10

T/F

A corporation’s tax preference items that must be taken into account for AMT purposes includes tax-exempt interest on private activity bonds issued in 2008

Answer 10

TRUE

Note that tax-exempt interest on private activity bonds issued in 2009 and 2010 is not a tax preference item.

Question 11

T/F

A corporation’s tax preference items that must be taken into account for AMT purposes includes capital gains

Answer 11

FALSE

Capital gains are not a preference item in computing AMT.

Question 12

T/F

In computing AMT, a corporation must include as an adjustment the dividends received deduction

Answer 12

FALSE

This is neither an adjustment nor a tax preference item for AMT

Question 13

T/F

In computing AMT, a corporation must include as an adjustment the difference between regular tax depreciation and straight-line depreciation over 40 years for real property placed in service in 1998

Answer 13

TRUE

For real property placed in service before January 1, 1999, an AMT adjustment is necessary because for AMT purposes, real property must be depreciated using the straight-line method over a 40-year recovery period, rather than the 39-year or 27 & 1/2-year recovery period used for regular tax purposes.

Question 14

T/F

In computing AMT, a corporation must include as an adjustment charitable contributions

Answer 14

FALSE

This is neither an adjustment nor a tax preference item for AMT

Question 15

T/F

In computing AMT, a corporation must include as an adjustment interest expense on investment property

Answer 15

FALSE

This is neither an adjustment nor a tax preference item for AMT

Question 16

A corporation will not be subject to AMT if ___

Answer 16

It is the corporation’s First Tax Year

Question 17

After the first year, a corporation is exempt from AMT for each year that it passes a gross receipts test. A corporation will be exempt for its second year if its gross receipts for the first year did not exceed ____. For all subsequent years, a corporation is exempt f its average annual gross receipts for the testing period do not exceed _____

Answer 17

$5M

$7.5M

Question 18

T/F

Exemption from AMT is based on asset size

Answer 18

FALSE

Question 19

T/F

Exemption from AMT is based on number of shareholders

Answer 19

FALSE