Included in Alice’s regular taxable income and in her AMT base is a $300,000 capital gain on the sale of stock she owned for three years. Alice is in the 35% tax bracket for regular income tax purposes. In calculating her regular income tax liability, she uses the appropriate alternative tax rate on net capital gain of 15%.
a. What rate should Alice use in calculating her tentative AMT?
b. What is Alice’s AMT adjustment?
c. How would your answers in (a) and (b) change if the taxpayer were a C corporation in the 34% tax bracket for regular income tax purposes?