Tax Lesson 32 - Alternative Minimum Tax

1. If you owe AMT, you may be able to lower your total tax (regular tax plus AMT) by claiming itemized deductions on Form 1040, even if your total itemized deductions are less than the standard deduction. This is because

A. The standard deduction is not allowed for the AMT.
B. Claiming the standard deduction on Form 1040, you cannot claim itemized deductions for the AMT.
C. The standard deduction is allowed for the AMT.
D. Both A and B above.

2. The sum of the alternative tax net operating loss carryovers and carrybacks to the tax year, subject to limitations is

A. The ATNOLD.
B. The ATNOL.
C. The AMTI.
D. The AMTFTC.

3. Your AMT gain or loss from the disposition of property may be different from your gain or loss for the regular tax. This is because the property may have a different

A. Location for the AMT.
B. Adjusted basis for the AMT.
C. Time period for the AMT.
D. Allowable credit for the AMT.

4. Alternative minimum tax for individuals requires certain adjustments and preferences. Which of the following is a preference or adjustment item?

A. Personal exemptions.
B. Incentive stock options.
C. Tax exempt interest on certain private activity bonds.
D. All of the above.

5. Which of the following is not a tax preference item or an adjustment to taxable income for alternative minimum tax purposes?

A. Addition of personal exemptions.
B. Addition of standard deduction (if claimed).
C. Addition of all itemized deductions (if claimed).
D. None of the above.

6. If your filing status is married filing separately, you may have to pay the Alternative Minimum Tax if your taxable income for regular tax purposes, combined with certain adjustments and tax preference items, is more than

A. $ 69,950.
B. $ 22,500.
C. $ 34,975.
D. $ 46,200.

7. The tax law gives special treatment to some kinds of income and allows special deductions and credits for some kinds of expenses. Taxpayers who benefit from the law in these ways may have to pay at least a minimum amount of tax through an additional tax. This additional tax is

A. Tax on early distributions.
B. Tax preference items.
C. Alternative Minimum tax.
D. Personal property tax.

8. If your filing status is single or head of household, you may have to pay the Alternative Minimum Tax if your taxable income for regular tax purposes, combined with certain adjustments and tax preference items, is more than

A. $ 69,950.
B. $ 35,750.
C. $ 34,975.
D. $ 46,200.

9. To figure the amount, if any, of your alternative minimum tax (AMT) and to figure any credit limitation use

A. Form 6251.
B. Form 8801.
C. Form 1116.
D. Form 8814.

10. Attach Form 6251 to your return if

A. Form 6251, line 32 is greater than line 35.
B. You claim any general business credit, the qualified electric vehicle credit, the alternative motor vehicle credit, or the credit for prior year minimum tax.
C. The total of Form 6251, lines 9 through 28 if negative and line 32 would exceed line 35 if you did not take lines 9 through 28 into account.
D. Any of the above.

11. The exemption amount for the alternative minimum tax (AMT) has increased to $46,200 ($69,950 MFJ or Qualifying widow(er); $34,975 if married filing separately).     

True False

12. An eligible mortgage is a mortgage whose proceeds were used to buy, build, or substantially improve your main home or a second home that is a qualified dwelling. Even a mortgage whose proceeds were used to refinance another mortgage is an eligible mortgage.                      

True False

13. Refigure depreciation for the AMT for the following:

A. Residential rental property placed in service after 1998.
B. Any part of the cost of any property for which you made the election under Section 179 to treat the cost of the property as a deductible expense.
C. Qualified Indian reservation property.
D. None of the above.

14. Your passive activity gains and losses must be refigured for the AMT by taking into account all adjustments and preferences and any AMT prior year unallowed losses that apply to that activity.                  

True False

15. When applying the separate categories of income, use the applicable AMT rate instead of the regular tax rate to determine if any income is

A. "Taxable".
B. "High-Taxed".
C. "Nontaxable".
D. "Exempt".

16. No AMT adjustment is required for depreciation of qualified disaster assistance property that is eligible for the special depreciation allowance.                  

True False

17. The interest on qualified Midwestern disaster area bonds is a tax preference item for the AMT.                  

True False

18. If at the end of the tax year your liability exceeds the fair market value of your assets, increase your passive activity loss allowed by that excess (but not by more than your total loss).                

True False

19. The 90% limit on the alternative tax net operating loss deduction (ATNOLD) does not apply to the portion of an ATNOLD attributable to qualified disaster recovery assistance losses.

True False

20. Even if your rights in the stock are not transferable and are subject to a substantial risk of forfeiture, you may elect to include in AMT income the excess of the stock's fair market value over the exercise price upon the transfer to you of the stock acquired through exercise of the option.

True False