Question

1.David and Lola filed a joint return and claimed their two children, ages 22 and 6, as dependents. They reported adjusted gross income of $163,000 and taxable income of $133,000. Their regular tax was calculated to be $37,590. After calculating tax preference items and AMT adjustments to income, their alternative minimum taxable income (AMTI) was $178,500. Their tentative minimum tax was $48,375.

Is there any AMT added to their regular tax? If yes, how much is the AMT added? How much is their total tax?

2.Marty Morrell exercised 1,000 incentive stock options (ISOs) of his employer, Vendor Rights, Inc.The exercise cost was $8 per option. At the same time the stock was trading for $60 per share.Marty pays the company $8,000 and, in return, receives stock valued at $60,000.

For regular income tax purposes, does Marty have to report any income when exercising ISOs? Why?

For AMT purposes, how much is the adjustment he must make?

3.Bradley is a married filing jointly taxpayer with an AMTI of $1,325,000 in 2019. What is Bradley's AMT exemption for 2019?

4.George, age 50, has deductible medical expenses of $12,000 under the regular tax system and an AGI of $100,000. What are the tax consequences for computing George' AMTI?

A.George's AMTI is not affected by his medical expenses.

B.$300 of George's medical expenses must be added back to compute his AMTI.

C.$2,500 of George's medical expenses must be added back to compute his AMTI.

D.All of George's medical expenses must be deducted to compute his AMTI.

5.Your client, who has a taxable income of $200,000, is concerned about being subject to the AMT. The following income and deductions were included in computing taxable income. Select one item that may be added to (or subtracted from) regular taxable income in calculating the AMT

A.A long-term capital gain of $90,000

B.A cash contribution to your client's church of $18,000

C.Dividend income of $8,000

D.A state income tax deduction of $8,000

6.James and Jane filed a joint return in 2019. They calculate their taxable income to be $150,000 and regular tax to be $33,000. Assume that:

Their AMT adjustments to taxable income$20,000

Their total of tax preference items$30,000

AMT exemption $111,700

The AMT tax rate:

26% of alternative minimum taxable income (AMTI) up to $194,800 for all taxpayers ($97,400 for married taxpayers filing separately)

and 28% of AMTI exceeding that amount

a.What is their alternative minimum taxable income (AMTI) after AMT exemption?

b.What is their tentative minimum tax?

c.What is the amount of tax they must pay in 2019?