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Exam 17: Business Tax Credits and Corporate Alternative Minimum Tax

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Question 41

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Golden Corporation is an eligible small business for purposes of the disabled access credit. During the year, Golden makes the following expenditures on a structure originally placed in service in 1988. ​ In addition, $8,000 was expended by Golden on a building originally placed in service in the current year to ensure easy accessibility by disabled individuals. Calculate the amount of the disabled access credit available to Golden Corporation.

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The expenditures of $8,000 incurred on ...

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Question 42

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Black Company paid wages of $180,000, of which $40,000 was qualified wages for the work opportunity tax credit under the general rules. Black Company's deduction for wages for the year is:

A) $140,000.
B) $164,000.
C) $166,000.
D) $180,000.
E) None of the above.

F) A) and D)
G) A) and E)

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Question 43

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In deciding to enact the alternative minimum tax, Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

In calculating the AMT using the indirect method, do AMT adjustments and AMT preferences increase or decrease AMTI?

Joel placed real property in service in 2016 that cost $900,000 and used MACRS depreciation for regular income tax purposes. He is required to make a positive adjustment for AMT purposes in 2016 for the excess of depreciation calculated for regular income tax purposes over the depreciation calculated for AMT purposes.

Melinda is in the 35% marginal regular tax bracket. She reports a net capital gain of $150,000 on the sale of land which is eligible for the lower tax on net capital gain in calculating the regular income tax. Discuss the tax rate that applies to the $150,000 net capital gain in calculating the tentative AMT for Melinda.

Identify an AMT adjustment that applies for the individual taxpayer that does not apply for the corporate taxpayer and identify an AMT adjustment that applies for the corporate taxpayer that does not apply for the individual taxpayer.

Several years ago, Sarah purchased a 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.

Durell owns a construction company that builds residential housing. The company is eligible to use the completed contract method for regular income tax purposes. What can Durell do to minimize his AMT?

Income from some long-term contracts can be reported using the completed contract method for regular income tax purposes, but the percentage of completion method is required for AMT purposes for all long-term contracts.

Evan is a contractor who constructs both commercial and residential buildings. Even though some of the contracts could qualify for the use of the completed contract method, Evan decides to use the percentage of the completion method for all of his contracts. This increases Evan's AMT adjustment associated with long-term contracts for the current year.

Ford Corporation, a calendar year corporation, has alternative minimum taxable income (before any exemption) of $1.28 million for 2016. The company is not a small corporation. If the regular corporate tax is $209,000, Ford's alternative minimum tax for 2016 is:

Unused foreign tax credits can be carried back three years and forward fifteen years.

How can an AMT adjustment be avoided by a taxpayer who incurs circulation expenditures in the current tax year?

The AMT exemption for a corporation with $225,000 of AMTI is $18,750.

Cardinal Company incurs $800,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours. Assuming Cardinal claims the credit for employer-provided child care this year, its basis in the newly constructed facility is $640,000.

The required adjustment for AMT purposes for pollution control facilities placed in service this year is equal to the difference between the amortization deduction allowed for regular income tax purposes and the depreciation deduction computed under ADS.

In determining the amount of the AMT adjustments, discuss the difference in the treatment of a building placed in service after 1986 and before 1999 and a building placed in service after December 31, 1998.

Which of the following correctly describes the tax credit for rehabilitation expenditures?

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year. Cost depletion is $19,000. The property qualifies for a 15% depletion rate. Gross income from the property was $200,000 and net income before the percentage depletion deduction was $50,000. What is Eula's tax preference for excess depletion, if she maximized her regular-tax depletion deduction?