In: Accounting
1.Pat is 40, is single, and has no dependents. She received a salary of $390,000 in 2018. She earned interest income of $11,000, dividend income of $15,000, gambling winnings of $14,000, and interest income from private activity bonds (issued in 2015) of $40,000. The dividends are not qualified dividends. The following additional information is relevant.
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a. Compute Pat's taxable income and AMTI.
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Feedback
The purpose of the AMT formula is to reconcile taxable income to AMTI. The reconciliation of taxable income to AMTI is accomplished by entering reconciling items to account for differences between regular income tax provisions and AMT provisions. These reconciling items are referred to as AMT adjustments or tax preferences.
b. Compute Pat's tentative minimum tax.
If required, round amounts to the nearest dollar.
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Part 1
Taxable income computation
Salary |
$390,000 |
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Interest income |
11,000 |
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Dividend income |
15,000 |
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Gambling income |
14,000 |
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Adjusted gross income |
430000 |
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Itemized deductions: |
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Medical expenses ($12,000 – (7.5%*430000)) |
0 |
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State income taxes |
8,100 |
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Real estate taxes |
4,000 |
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Mortgage interest on residence |
13,100 |
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Investment interest expense |
3,800 |
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Gambling losses |
5,100 |
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Total itemized deductions |
34100 |
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Taxable income |
395900 |
Tentative minimum tax computation
Taxable income |
395900 |
Plus adjustments: |
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Medical expenses |
0 |
State income taxes |
8,100 |
Real estate taxes |
4,000 |
Subtotal |
408000 |
Plus: Preference (interest on private activity bonds) |
40,000 |
Alternative minimum taxable income (AMTI) |
448000 |
Exemption [$70300 – 25%($448000-191500)] |
(6175) |
AMT base |
441825 |
AMT rate |
28% |
Tentative AMT |
123711 |