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Exam 17: Business Tax Credits and Corporate Alternative Minimum Tax

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Question 1

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Income from some long-term contracts can be reported using the completed contract method for regular income tax purposes,but the percentage of completion method is required for AMT purposes for all long-term contracts.

A) True
B) False

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Question 2

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The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.

A) True
B) False

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Question 3

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The AMT exemption for a corporation with $225,000 of AMTI is $18,750.

Any unused general business credit must be carried back 3 years and then forward for 20 years.

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year.Cost depletion is $19,000.The property qualifies for a 15% depletion rate.Gross income from the property was $200,000 and net income before the percentage depletion deduction was $50,000.What is Eula's tax preference for excess depletion?

Unused foreign tax credits can be carried back three years and forward fifteen years.

The purpose of the tax credit for rehabilitation expenditures is to encourage the relocation of businesses from older,economically distressed areas (i.e. ,inner city)to newer locations.

Vicki owns and operates a news agency (as a sole proprietorship) .During 2015,she incurred expenses of $24,000 to increase circulation of newspapers and magazines that her agency distributes.For regular income tax purposes,she elected to expense the $24,000 in 2015.In addition,Vicki incurred $15,000 in circulation expenditures in 2016 and again elected expense treatment.What AMT adjustments will be required in 2015 and 2016 as a result of the circulation expenditures?

For the ACE adjustment,discuss the relationship between ACE and unadjusted AMTI.

During the year,Purple Corporation (a U.S.Corporation) has U.S.-source income of $1,800,000 and foreign income of $600,000.The foreign-source income generates foreign income taxes of $150,000.The U.S.income tax before the foreign tax credit is $816,000.Purple Corporation's foreign tax credit is:

Qualified research and experimentation expenditures are not only eligible for the 20% tax credit,but also can be expensed in the year incurred.

Omar acquires used 7-year personal property for $100,000 to use in his business in February 2015.Omar does not elect § 179 expensing,but does take the maximum regular cost recovery deduction.He elects not to take additional first-year depreciation.As a result,Omar will have a positive AMT adjustment in 2015 of what amount?

Sand Corporation,a calendar year taxpayer,has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE) ] of $900,000 for 2015.If Sand's (ACE) is $975,000,its tentative minimum tax for 2015 is:

The corporate AMT no longer applies.

Cardinal Corporation hires two persons certified to be eligible employees for the work opportunity tax credit under the general rules (e.g. ,food stamp recipients) ,each of whom is paid $9,000 during the year.As a result of this event,Cardinal Corporation may claim a work opportunity credit of:

Identify an AMT adjustment that applies for the individual taxpayer that does not apply for the corporate taxpayer and identify an AMT adjustment that applies for the corporate taxpayer that does not apply for the individual taxpayer.

Paul incurred circulation expenditures of $180,000 in 2015 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for 2016,2017,and for 2018.

In calculating the AMT using the indirect method,do AMT adjustments and AMT tax preferences increase or decrease AMTI?

Because passive losses are not deductible in computing either taxable income or AMTI,no adjustment for passive losses is required for AMT purposes.

Cardinal Company incurs $800,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours.Assuming Cardinal claims the credit for employer-provided child care this year,its basis in the newly constructed facility is $640,000.