Question

In year 1, GSL Corp,'s alternative minimum tax base was $2,000,000 and its regular tax liability is $350,000.

a. What is GSL's total tax liability for years 1,2,3 and 4 (by year) assuming the following

Year 2: AMT base $600,000: Regular Tax liability $100,000

Year 3: AMT base $500,000: Regular tax liability $160,000

Year 4: AMT base $1,000,000: Regular tax liability $150,000

Total Tax Liability

Year 1

Year 2

Year 3

Year 4

Answer 1

Solution;:-

Year 1 Calculation -

GSL will owe $400,000 in taxes ($50,000 of AMT and $350,000 of regular tax liability )

TMT = $400,000 ($2,000,000 × 20%)

AMT = $50,000 ($400,000 of TMT - $350,000 of regular tax liability)

MTC = $50,000 (this is the amount of AMT which is paid in year 1)

Year 2 Calculation -

GSL will owe $120,000 in taxes

TMT = $120,000 ($600,000 × 20%)

AMT = $20,000 ($120,000 TMT minus $100,000 regular tax liability)

MTC = $20,000 (Current year AMT amount)

MTC carry forward = $70,000 ($50,000 last year + $20,000 current year)

Year 3 Calculation :-

GSL will owe $100,000 in taxes

TMT = $100,000 ($500,000 × 20%)

AMT = $0 (Here the regular tax liability exceeds the amount of TMT)

MTC Carry forward = $10000 ($70,000 carryover from last year - $60,000 in utilised in the current year 3)

Year 4 Calculation -

GSL will owe $200,000 in taxes

TMT = $200,000 ($1,000,000 × 20%)

AMT = $50,000 ($200,000 TMT - $150,000 regular tax liability )

MTC = $50,000 current year

MTC carry forward to year 5 = $60,000 ($10,000 which was carry over from previous year + $50,000 of the current year)