Question

 

1. AMT - corporate example

Lessland Co. has the following income, etc. in 2017:

Taxable income                                               $100,000

Depreciation adjustment                                18,000

Installment gain (not on inventory sale)        80,000 (ACE)

Federal income tax provision on       

financial stmts.                                               75,000

Penalties and fines                                          2,000

Private activity bond interest income           25,000

Other tax-exempt interest                              20,000 (ACE)

Hint: The depreciation adjustment is an AMT adjustment and the private activity bond interest is a tax preference for AMTI.

QUESTION: What is Lessland’s AMT?

Answer: $16,750

Answer 1

Particulars	Amount	Amount
Taxable income		100,000
Adjustments:
Depreciation		18,000
Private activity bond interest		25,000
75% ACE adjustment:
Installment gain	80,000
Tax-exempt interest	20,000
Total ACE	100,000
75% of it		75,000
AMTI		218,000
Exemption	23,000
AMT base		195,000
Tentative tax		39,000
Regular tax		22,250
AMT		16,750

AMT exemption = 40,000 - (218,000-150,000)*25% = 23,000

Tentative tax = 195,000 * 20% = 39,000

Regular tax on 100,000 taxable income is 22,250 (from tax rate schedule)