Q1. Archie runs a small mineral exploration business (as a sole proprietorship). In 2017, he purchased land (for $84,000) where he suspected a magnesium deposit was located. He incurred $18,000 of exploration costs related to the development of the magnesium mine in 2017 and an additional $32,000 of exploration costs in 2018. Archie elected to deduct these expenditures for regular tax purposes in both 2017 and 2018.

In 2019, given a decline in magnesium prices, Archie chose to sell the property for $72,000, rather than bring the mine to production.

• AMT adjustment is required for mine exploration expenditures?
• AMT adjustment for the sale of the land?

Part B. In 2019, Liza exercised an incentive stock option that had been granted to her in 2017 by her employer, Weather Corporation. Liza acquired 100 shares of Weather stock for the option price of $7,800 per share. The rights in the stock become freely transferable and not subject to a substantial risk of forfeiture in 2019. The fair market value of the stock at the date of exercise was $9,500 per share. Liza sells the stock for $10,700 per share later in 2021.

If an amount is zero, enter "0".

a. What is the amount of Liza's AMT adjustment in 2019? What is her recognized gain on the sale for regular income tax and for AMT purposes in 2021?

• AMT adjustment of $?
• Her recognized gain on the sale for regular income tax is? and for AMT purposes?
• As a result, Liza has a AMT adjustment in 2021?

b. How would your answers in (a) change if Liza had sold the stock in 2019 rather than 2021?

• Liza has a AMT adjustment is required in 2019?
• For regular tax purposes, Liza would recognize of ordinary/compensation income? and of short-term capital gains?