CPA Regulation (REG) : Alternative Minimum Tax
Study concepts, example questions & explanations for CPA Regulation (REG)
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Example Questions
Example Question #1 : Individual Tax Issues
The credit for prior year AMT liability may be carried:
Back three years
Forward for a maximum of 15 years
Forward indefinitely
Back three years or forward a maximum of 15 years
Forward indefinitely
Like capital losses for individuals, AMT credits may be carried forward indefinitely for individual taxpayers.
Example Question #2 : Individual Tax Issues
Which of the following is not an adjustment or preference to arrive at alternative minimum taxable income?
Passive activity losses
Deductible state and local taxes
Deductible contributions to individual retirement accounts
Individual taxpayer net operating losses
Deductible contributions to individual retirement accounts
Adjustments and preferences to arrive at AMTI include many items, such as passive activity losses, accelerated depreciation, net operating loss of an individual taxpayer, state and local taxes, the standard deduction, and private activity bond interest income. Deductible contributions to IRAs are treated the same under AMTI as for taxable income.
Example Question #1 : Individual Tax Issues
West is single, has no dependents, and does not itemize. West provides the following information regarding his current-year’s return:
- Long-term capital gain: $ 15,000
- Percentage depletion in excess of property’s adjusted basis: 9,000
- Dividends from publicly held companies: 10,000
What is the amount of West’s AMT tax preference items?
$24,000
$34,000
$19,000
$9,000
$9,000
Among the options provided, only the percentage depletion in excess of a property’s adjusted basis is included as an AMT tax preference item.
Example Question #3 : Individual Tax Issues
The credit for prior year AMT liability may be carried:
Back to the three preceding years
Forward indefinitely
Forward for a maximum of five years
Back to the three preceding years or carried forward for a maximum of five years
Forward indefinitely
AMT paid can be claimed as a credit against other years if the tax was paid on items that increased AMT that year but will reverse in later years. The credit is carried forward indefinitely.
Example Question #4 : Individual Tax Issues
Of the following is not an adjustment or preference to arrive at AMTI?
Deductible contributions to individual retirement accounts
Deductible state and local taxes
Individual taxpayer net operating losses
Passive activity losses
Deductible contributions to individual retirement accounts
Deductible contributions to individual retirement accounts are not an adjustment or preference in calculation a taxpayer’s AMTI. They are an adjustment in calculating adjusted gross income for regular tax purposes.
Example Question #5 : Individual Tax Issues
Of the following, which are allowable itemized deductions for computing AMT income?
Home mortgage interest on a loan to acquire a principal residence
Neither
Deductible real estate property taxes
Both
Home mortgage interest on a loan to acquire a principal residence
Both of these options are normal itemized deductions (Sch A) however not all itemized deductions are included in AMTI.
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