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6 Cards in this Set

  • Front
  • Back
What is the Alternative Minimum Tax?
it is a tax designed to ensure that taxpayers who take a large number of tax preferences deduction pay a minimum amount of tax on their income.
How is the AMT calculated?
Regular Taxable income
+(-) adjustments
+ Prefernces
---------------------------------
AMT Taxable Income
<Exemption>
---------------------------------
AMT Tax Base
x Tax computation
---------------------------------
Tentative AMT Tax
<Tax Credits>
---------------------------------
Tentative Minimum Tax
<Regular Income Tax>
---------------------------------
AMT
Pay in addition to regular tax
What is the Exemption Amounts formula?
Exemption amounts is 33,750 less 25% (AMTI---112,500) for single. 45,000 less 25% (AMTI---150,000) for MFJ. 22,500 less 25% (AMTI---75,000) MFS

Example:
Joint
exemption 45,000
AMTI
<150,000>
-------------
Excess
<Reduction>
------------------
AMT
Exemption
------------------
------------------
What are adjustments for AMT?

HINT: PANIC TIME
P = Passive activity losses
A = Accelerated depreciation (post-1986 purchase)
N = Net operating loss of the individual taxpayer
I = Installment income of a dealer
C = Contracts - percentage completion vs. completed contract

T = Tax "deductions"
I = Interest deductions on some home "equity loans"
M = Medical deductions ( limited to excess over 10% AGI)
E = Exemptions (personal) and standard deduction
What are Tax Preference Items?

HINT: PPP
P = Private activity bond interest income ( on certain bonds)

P = Percentage depletion the excess over adjusted basis of property

P = Pre-1987 accelerated depreciation
What is the credit for AMT?

HINT : FACCE
F = Foreign tax credit
A = Adoption credit
C = Child tax credit
C = Contribution to retirement plans credit
E = Earned income credit