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Alternative Minimum Tax

Alternative Minimum Tax. Dante’s Inferno. AMT Formula. Regular Taxable Income +/- AMT adjustments + AMT preferences Alternative Minimum Taxable Income (AMTI) ‘- Exemption Alternative Minimum Tax base X AMT rate(s) Tentative Minimum Tax ‘-Regular Tax Alternative Minimum Tax.

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Alternative Minimum Tax

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  1. Alternative Minimum Tax Dante’s Inferno

  2. AMT Formula Regular Taxable Income +/- AMT adjustments + AMT preferences Alternative Minimum Taxable Income (AMTI) ‘- Exemption Alternative Minimum Tax base X AMT rate(s) Tentative Minimum Tax ‘-Regular Tax Alternative Minimum Tax

  3. 4. Which one of the following must be done before the AMT calculations can be made? a. The taxpayer's current taxable income must be calculated. b. The taxpayer's Federal tax liability for regular tax purposes must be calculated. c. AMT adjustments and tax preferences must be identified. d. a and b. e. a, b, and c.

  4. Additional Flashpoints • NOLs different for regular tax and AMT • Incentive Stock Options (ISOs) in 1st year the rights in stock vest; affects AMT stock basis • Depreciation: must use ADS; affects adjusted basis for AMT • Medical amount exceeding 10% AGI • Interest on private activity bonds • AMT now allows foreign tax credit and certain other credits • Passive Activity Losses

  5. Industry Specific • Circulation Expenditures • Pollution Control Facilities • Completed Contract Method • Percentage Depletion • Intangible Drilling Costs • Tax-exempt interest on private activity bonds

  6. Exemptions • 2006: $58,000 MFJ; $40,250 single/HOH • 25% Phase-out if AMTI exceeds $112,500 single/HOH, $150,000 MFJ • 2008: $69,950MFJ; $46,200 single/HOH: tuition and dependent care credits can offset this year, as can CTC

  7. AMT Rates • 26%, 1st $175,000 • 28% on excess over $175,000 • Capital gains retain 15%, 5% rates

  8. Corporate AMT • 20% AMT rate • Exemption is $40,000 • 25% phase-out on amount over $150,000 • Repealed for small corps. • Avg. gross receipts <$5 mil.

  9. AMT Credit • AMT generates a credit carried forward and used to offset future excess of regular tax over Tentative Minimum Tax, but not below Tentative Minimum Tax

  10. Example ’01 ’02 ’03 ‘04 Reg. Tax $12k $13k $14k $15 Tent. Min. $10k $16k $12k $10 Amt due? $12k $16k $12k $14

  11. 6. Which one of the following does not describe the minimum tax credit? a. Indefinite carryforward b. Offsets any future minimum tax liability c. Offsets any future regular tax liability d. Referred to as the adjusted net minimum tax

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