Multiple Choice Questions

1. When an entity is responsible for paying the alternative minimum tax (AMT) due to adjustments related to the timing of income, how might that excess tax be recovered?

a. File a claim for a refund in the year paid.

b. Carry forward to offset against a future AMT liability only.

c. Carry forward to offset against future AMT or regular tax liabilities.

d. Carry forward to offset against a future regular tax liability only.

2. Identify any item or items below which are added to Alternative Minimum Taxable Income (AMTI) in order to compute the Adjusted Current Earnings (ACE) adjustment.

I. Dividends-received deduction on dividends received from a 20%-owned corporation.

II. Municipal bond interest, excluding any municipal bond interest already included in AMTI.

III. Life insurance proceeds on the death of a key employee.

a. I and III only

b. I, II and III

c. I and II only

d. II and III only

3. Mary, age 65, reported adjusted gross income of $150,000 for the year. Mary also incurred $20,000 in medical expenses. In computing Mary's alternative minimum tax, what is the adjustment for Mary's medical expenses?

a. $3,750

b. $5,000

c. $8,750

d. $11,250

4. Which of the following will increase a taxpayer's alternative minimum taxable income (AMTI)?

5. Which of the following best describes the effect of a tax credit?
a. It reduces a person's gross income.
b. It reduces a person's adjusted gross income.
c. It reduces a person's taxable income.
d. It reduces a person's tax liability.

al. b. C. d. Personal Exemption Yes Yes No Yes Property Taxes Yes Yes Yes No Medical Expenses Over 10% of AGI Yes No Yes Yes