25 May Question 1. Crimson, Inc., provides you with the following information
Question
1. Crimson, Inc., provides you with the following information:
| Regular corporate tax liability | $ 22,250 |
| AMT adjustments and preferences (excluding ACE adjustment) | 80,000 |
| ACE adjustment (prior positive adjustments are $17,000) | (11,000) |
| Taxable income
Calculate Crimson’s AMT for 2014. |
100,000 |
2. Beige, Inc., has AMTI of $200,000. Calculate the amount of the AMT exemption if:
a. Beige is a small corporation for AMT purposes.
b. Beige is not a small corporation for AMT purposes.
3. Why is there a need for a second tax system called the alternative minimum tax?
4. What is the relationship between taxable income and AMTI?
5. What is the relationship between the regular income tax liability and the tentative AMT?
6. In calculating the AMT using the indirect method, do AMT adjustments and AMT tax preferences increase or decrease AMTI?
7. Will all AMT adjustments reverse? That is, do they relate to timing differences?
8. What is the purpose of the AMT exemption amount? What is the maximum amount for each filing status for an individual taxpayer and for a corporate taxpayer?
9. Melinda is in the 35% marginal tax bracket. She has a net capital gain of $150,000 on the sale of land which is eligible for the alternative 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.
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