instructions : Choose the best multiple choice answer and explain why you chose
ID: 2580682 • Letter: I
Question
instructions : Choose the best multiple choice answer and explain why you chose the answer. MUST provide 2-3 sentence brief explanation and show all work. All sources must be noted.
____ 18. Mel, who is single and age 37, provides you with the following information from his financial records.
Regular income tax liability
$ 47,228
AMT positive adjustments
40,000
AMT preferences
20,000
Taxable income
190,000
Calculate his AMT exemption for 2016.
a.
$0.
b.
$23,450.
c.
$14,075.
d.
$48,450.
e.
None of the above.
Regular income tax liability
$ 47,228
AMT positive adjustments
40,000
AMT preferences
20,000
Taxable income
190,000
Explanation / Answer
EMT exemption is none of the above (refer below workings)
Calculation of AMT exemption for 2016
General formula for calculation AMT exemption goes like this
Taxable Income = $190,000
+ Positive Adjustments = $40,000
– Negative Adjustments = $0
+ Tax Preferences = 20,000
= Alternative Minimum Taxable Income
Taxable income
$190,000
Add : Positive Adjustments
$40,000
Less : Negative Adjustments
$0
Add : Tax Preferences
$20,000
Alternative Minimum Taxable Income
$250,000
AMT exemption amount is $53,900 and phase out at $119,700
Taxable income is $250,000-$119,700(phase out) = $130,300*.28 = $36,484.
So AMT exemption would be equal to $53,900 – $36,484 = $17,416
Taxable income
$190,000
Add : Positive Adjustments
$40,000
Less : Negative Adjustments
$0
Add : Tax Preferences
$20,000
Alternative Minimum Taxable Income
$250,000
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