Alternative Minimum Tax Dante s Inferno AMT Formula Regular

1
Alternative Minimum Tax

• Dantes 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• Repealed for small corps.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 lt5 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

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Example

• 01 02 03 04
• Reg. Tax 12k 13k 14k 15
• Tent. Min. 10k 16k 12k 10
• Amt due?
• 12k
• 16k
• 12k
• 14

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• 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