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Special Tax Computation Methods, Tax Credits


Submitted By HappyDog
Words 9423
Pages 38
Chapter I:14
Special Tax Computation Methods, Tax Credits and Payment of Tax
Discussion Questions
I:14-1 Most taxpayers are not subject to the alternative minimum tax (AMT) because they do not have substantial tax preferences and AMT adjustments and because there is a liberal exemption amount to reduce the tax base on which the AMT is calculated. However, more and more taxpayers in recent years are being subjected to the AMT. p. I:14-2.
I:14-2 No, the alternative minimum tax does not apply if an individual's tentative minimum tax under the AMT rules is less than his regular tax liability. It applies only if the tentative minimum tax exceeds the regular tax liability. p. I:14-3.
I:14-3 b. only. Only excess depreciation for real property placed in service before 1987 is a tax preference item. For tax years prior to 1987, net long-term capital gains were a tax preference item
(i.e., the 60% long-term capital gain deduction) and for taxable years prior to 1993 the appreciated element related to charitable contributions of capital gain real property was a tax preference item. p.
I:14-4 a, b, c only. Itemized deductions that are not allowed in computing AMTI, excess depreciation on real property placed in service after 1986, and excess MACRS depreciation for personal property placed in service after 1986, are all AMT adjustments. Tax-exempt interest is not an AMT adjustment but may be a tax preference item if the bonds are private activity bonds. pp.
I:14-4 through I:14-6.
I:14-5 a and b only. Charitable contributions and mortgage interest on a personal residence are deductible when computing AMT. Mortgage interest is subject to the restrictions pertaining to qualified housing interest. Other interest is deductible up to the amount of qualified net investment income and since the individual has no investment income, the other

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