1. Chapter 07 Individual AMT. Howard Godfrey, Ph.D., CPA UNC Charlotte

3. Alternative Minimum Tax (AMT)
The alternative minimum tax is designed to impose a minimum amount of tax that a taxpayer must pay.
Taxpayer must pay at least the minimum amount of tax
Figured separately from regular income tax
Requires keeping a separate records

4. Alternative Minimum Tax
IF AMT is greater than the regular tax, taxpayers pay the larger amount
Rate is 26% on first $175,000 and 28% on excess for individuals

6. Most reverse due to timing differences Examples:
AMT Adjustments
Purpose is to account for effect of special alternative rates or calculations
Most reverse due to timing differences
Examples:
Required use of completed contract method
No gain deferral for installment sales
Recalculation of NOL; limited NOL deduction
Depreciation under ADS versus MACRS
Individuals must limit itemized deductions, delete personal exemption, report income from ISOs

7. AMT Preferences Apply to all taxpayers
Always added in the computation of AMTI
Are permanent differences and do not reverse
Add back:
Percentage depletion in excess of basis
Limitation of intangible drilling costs
Tax-exempt interest from private activity bonds
Excess depreciation over straight-line for property acquired before 1987
Part of gain exclusion on small business stock

8. AMT Exemptions
Designed to eliminate taxpayers with relatively moderate income and small amounts of adjustments and/or preferences
Phased-out at rate of 25 cents for every dollar of AMTI over base
Entity Initial exemption Base
Corporation $40,000 $150,000
Married, joint 74, ,000
Single & H-of-H 48, ,500
Married, separate 37, ,000

9. Calculated each year in which AMT applies
AMT Minimum Tax Credit
Calculated each year in which AMT applies
Designed to avoid double jeopardy caused by timing differences
Deducted from regular tax
Amount is the difference between actual AMT and what AMT would be without the reversal adjustments

15. Scott and Sandy had alternative minimum taxable income of $200,000 in 2011, and file a joint return. For purposes of computing the alternative minimum tax, their AMT exemption is:

24. The End