Question

In: Accounting

Arthur Wesson is a single taxpayer and had $350,000 of alternative minimum taxable income for 2018....

Arthur Wesson is a single taxpayer and had $350,000 of alternative minimum taxable income for 2018.

REQUIRED:

1) Calculate his alternative minimum tax..

2) Would it make a difference if he were married? Assume no credits are available.

Please show all calculations.

Expert Solution

Answer :

1). Alternate Minimum Tax if Arthur Wesson is Single = $ 74,486.

Workings:

For single taxpayers under threshold of $ 500,000 there is an exemption of $ 70,300 from AMTI income before finding tax.

Therefore, Arthur Wesson's taxable AMTI after exemption = $350,000 - 70,300 = $ 279,700

Tax upto $ 191,500 @ 26% = $ 49,790

Tax on balance $88,200 @ 28% = $ 24,696

His total tax = $ 74,486.

2).Yes, there will be a difference if he gets married.

His Alternate Minimum Tax will be

$ 63,538 - Married and filing jointly
$ 80,769 - Married and filing seperately

Arthur Wesson would have to pay lesser AMT if his filing status is Married and filed jointly.

Workings :

Married and filing jointly :

Exemption on AMTI if Arthur where married and filled jointly is $ 109,400.

Taxable AMTI = 350,000 - 109400 = $240,600.

Tax on AMTI upto $ 191,500 @ 26%= $ 49,790

Tax on balance $ 49,100 @ 28% = $ 13,748

Total Tax = $ 63,538

Married and filing seperately :

Exemption amount = $ 54,700

Taxable AMTI = 350,000 - 54,700 = $295,300

Tax on AMTI upto $ 95,750 = $ 24,895

Tax on balance 199,550 @ 28% = $ 55,874

Total Tax = $ 80,769

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