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Exam 17: Business Tax Credits and the Alternative Minimum Tax

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Question 51

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A taxpayer who expenses circulation expenditures in the year incurred for regular income tax purposes will incur a positive AMT adjustment in the following year.

A) True
B) False

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Question 52

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Kerri, who has AGI of $120,000, itemized her deductions in the current year.She paid mortgage interest of $17,000 on her primary residence and $2,400 of interest on a home equity loan.The proceeds of the home equity loan were used to purchase a new minivan for her family.Kerri incurs a positive AMT adjustment of $19,400 in computing AMT.

A) True
B) False

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Question 53

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The AMT credit is created for any AMT that results from timing differences, but it is not created by any AMT that results from the adjustment for itemized deductions or exclusion preferences.

Assuming no phaseout, the AMT exemption amount for a married taxpayer filing separately for 2019 is exactly half of the AMT exemption amount for an individual taxpayer.

The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.

The sale of business property could result in an AMT adjustment.

Several years ago, Sarah purchased a certified historic structure for $150,000 that was placed in service in 1929.In the current year, she incurred qualifying rehabilitation expenditures of $200,000.The amount of the tax credit for rehabilitation expenditures and the amount by which the building's basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts.

In the renovation of its building, Green Company incurs $9,000 of expenditures that qualify for the disabled access credit.The disabled access credit is:

Because passive losses are not deductible in computing either taxable income or AMTI, no AMT adjustment for passive losses is required.

Each of A, B, and C is each single, reports wage income of $435,000, and takes the standard deduction.The following additional information is provided about each taxpayer. A: Resides in New York and has $145,000 interest income from Treasury bonds.B: Resides in Nevada and has $145,000 capital gain from the sale of stock. C: Resides in Florida and has $145,000 interest income from private-activity municipal bonds. All else being equal and taking into consideration the principles underlying the AMT, which of these taxpayers has the highest likelihood of being subject to the AMT in the current tax year?

Interest income on private activity bonds issued in 2015 reduced by expenses incurred in carrying the bonds is a preference item that is included in computing AMTI.

The phaseout of the AMT exemption amount for a taxpayer filing as a head of household both begins and ends at a higher income level than the phaseout for a single taxpayer.

Jackson sells qualifying small business stock for $125,000 (adjusted basis of $105,000) in 2019 (the stock was acquired in 2012).In calculating gross income for regular income tax purposes, he excludes all of his realized gain of $20,000.The $20,000 exclusion is a preference in calculating Jackson's AMTI.

Benita expensed mining exploration and development costs of $500,000 incurred in the current tax year.She will be required to make negative AMT adjustments for each of the next 10 years.