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Exam 17: Business Tax Credits and Corporate Alternative Minimum Tax

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Question 51

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Keosha acquires 10-year personal property to use in her business in 2016 and takes the maximum cost recovery deduction for regular income tax purposes. As a result of this, Keosha will incur a positive AMT adjustment in 2016.

A) True
B) False

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Question 52

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The tax benefit received from a tax credit is never affected by the tax rate of the taxpayer.

A) True
B) False

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Question 53

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In computing the foreign tax credit, the greater of the foreign income taxes paid or the overall limitation is allowed.

The purpose of the work opportunity tax credit is to encourage employers to hire individuals from specified target groups traditionally subject to high rates of unemployment.

Several years ago, Tom purchased a structure for $300,000 that was placed in service in 1929. Three and one-half years ago he incurred qualifying rehabilitation expenditures of $600,000. In the current year, Tom sold the property in a taxable transaction. Calculate the amount of the recapture of the tax credit for rehabilitation expenditures.

Elmer exercises an incentive stock option (ISO) in 2016 for $6,000 (fair market value of the stock on the exercise date is $7,600). If Elmer sells the stock later in 2016 for $8,000, the AMT positive adjustment is $1,600 and the AMT negative adjustment is $2,000.

Explain the purpose of the tax credit for rehabilitation expenditures and describe the general characteristics of its computation.

In May 2016, Blue Corporation hired Camilla, Jolene, and Tyrone, all of whom are certified as long-term family assistance recipients. Each employee is paid $12,000 during 2016. Camilla and Tyrone continued to work for Blue Corporation in 2017, earning $14,000 each. Blue hired no additional employees during 2017. a.Compute Blue Corporation's work opportunity tax credits for 2016 and 2017. b.Assume Blue Corporation pays total wages of $500,000 to its employees during 2016 and $560,000 during 2017. How much may Blue Corporation claim as a wage deduction for 2016 and 2017 if the work opportunity tax credit is claimed in both years?

Employers are encouraged by the work opportunity tax credit to hire individuals who have been long-term recipients of family assistance welfare benefits.

Because current U.S. corporate income tax rates are higher than many foreign corporate income tax rates only infrequently will the credit's, the overall limitation yield a lower foreign tax credit than the amount of foreign taxes actually paid.

If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, the cost of the ramp qualifies for the disabled access credit.

The sale of business property might result in an AMT adjustment.

AMTI may be defined as regular taxable income after AMT adjustments (other than the NOL and ACE adjustments) and after tax preferences.

Will all AMT adjustments reverse? That is, do they relate to timing differences?

Sand Corporation, a calendar year C corporation, reports alternative minimum taxable income of $900,000 for 2016. Sand's tentative minimum tax for 2016 is:

The ACE adjustment can be positive or negative.

Use the following selected data to calculate Devon's taxable income prior to any personal exemption taken. Devon does not itemize deductions.

In 2016, Job Corporation, a calendar year taxpayer, has AMTI (before adjustment for adjusted current earnings) of $7 million. If Job Corporation's ACE is $16 million, its tentative minimum tax for 2016 is:

What is the relationship between the regular income tax liability and the TMT?

Under what circumstances are C corporations exempt from the AMT?