Problem 12-25 (LO. 2, 3, 4, 5) Arthur Wesson, an unmarried individual who is age 58, reports taxable income of $510,000 in 2021. He reports positive AMT adjustments of $80,000 and preferences of $35,000. Arthur itemizes his deductions, and his regular tax liability in 2021 is $153,044. Click here to access the exemption table. a. Arthur's initial AMT exemption amount for 2021 is $ X , since his filing status is single. However, the exemption is phased out at a rate of 25 cents on the dollar when AMTI exceeds $ X . Therefore, Arthur's total AMT exemption will be $ X. rate applies to the first $199,900 of the AMT A graduated, two-tier AMT rate schedule applies to individual taxpayers. A 26% base, and a 28% rate applies to the AMT base in excess of $199,900. Compute Arthur's AMT for 2021. Compute Arthur's AMT for 2021. Arthur's taxable income (before personal exemption) 510,000 Plus: Positive AMT adjustments 80,000 Plus: Tax preferences 35,000 Equals: AMTI 625,000 Less: Exemption Equals: AMT base Tentative AMT Regular income tax liability $153,044 AMT b. What is the total amount of Arthur's tax liability? c. Complete the e-mail explaining to Arthur why he must pay tax in excess of the regular tax liability. From: Samantha Ash (SAsh@swft.com) Sent: February 4, 2022 To: Arthur Wesson (AWesson@FederalWest.com) Subject: 2021 income tax liability Dear Mr. Wesson: We have calculated your total Federal tax liability for 2021 to be $ 160,244 X . This consists of the regular tax liability of $153,044 and the alternative minimum tax (AMT) liability of $ 50,854 X. Because this is the first year you have been subject to the AMT, I thought I should comment on this additional tax. The calculation of the AMT appears on Form 6251. The AMT is a parallel income tax system. Its purpose is to provide assurance that no taxpayer with substantial economic income can avoid significant tax liability by using exclusions, deductions, and credits. As indicated on Form 6251, some of the exclusions and deductions that are part of your regular taxable income are disallowed as a part of the AMT calculation. These items increase your regular taxable income amount and, as a result, subject you to AMT in the current tax year. Problem 12-25 (LO. 2, 3, 4, 5) Arthur Wesson, an unmarried individual who is age 58, reports taxable income of $510,000 in 2021. He reports positive AMT adjustments of $80,000 and preferences of $35,000. Arthur itemizes his deductions, and his regular tax liability in 2021 is $153,044. Click here to access the exemption table. a. Arthur's initial AMT exemption amount for 2021 is $ X , since his filing status is single. However, the exemption is phased out at a rate of 25 cents on the dollar when AMTI exceeds $ X . Therefore, Arthur's total AMT exemption will be $ X. rate applies to the first $199,900 of the AMT A graduated, two-tier AMT rate schedule applies to individual taxpayers. A 26% base, and a 28% rate applies to the AMT base in excess of $199,900. Compute Arthur's AMT for 2021. Compute Arthur's AMT for 2021. Arthur's taxable income (before personal exemption) 510,000 Plus: Positive AMT adjustments 80,000 Plus: Tax preferences 35,000 Equals: AMTI 625,000 Less: Exemption Equals: AMT base Tentative AMT Regular income tax liability $153,044 AMT b. What is the total amount of Arthur's tax liability? c. Complete the e-mail explaining to Arthur why he must pay tax in excess of the regular tax liability. From: Samantha Ash (SAsh@swft.com) Sent: February 4, 2022 To: Arthur Wesson (AWesson@FederalWest.com) Subject: 2021 income tax liability Dear Mr. Wesson: We have calculated your total Federal tax liability for 2021 to be $ 160,244 X . This consists of the regular tax liability of $153,044 and the alternative minimum tax (AMT) liability of $ 50,854 X. Because this is the first year you have been subject to the AMT, I thought I should comment on this additional tax. The calculation of the AMT appears on Form 6251. The AMT is a parallel income tax system. Its purpose is to provide assurance that no taxpayer with substantial economic income can avoid significant tax liability by using exclusions, deductions, and credits. As indicated on Form 6251, some of the exclusions and deductions that are part of your regular taxable income are disallowed as a part of the AMT calculation. These items increase your regular taxable income amount and, as a result, subject you to AMT in the current tax year
