Arthur Wesson, an unmarried individual who is age 68, has taxable income of $160
ID: 2450469 • Letter: A
Question
Arthur Wesson, an unmarried individual who is age 68, has taxable income of $160,000 in 2015 (after the deduction of his personal exemption). He has positive AMT adjustments of $40,000 and preferences of $35,000.
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In your computations, round amounts to the nearest dollar and use these values in subsequent computations. When required, round your final answers to the nearest dollar.
a. Arthur's initial AMT exemption amount for 2015 is $ ( ), since his filing status is single. However, the exemption is (Phased out) at a rate of 25 cents on the dollar when AMTI exceeds $ ( ). Therefore, Arthur's total AMT exemption will be $ ( ).
A graduated, two-tier AMT rate schedule applies to individual taxpayers. A (26%, 33%, or 35%) rate applies to the first $185,400 of the AMT base, and a Select (15%28% or 33%) rate applies to the AMT base in excess of $185,400.
Compute Arthur's AMT for 2015.
Arthur's taxable income (before personal exemption)
Plus:
Positive AMT adjustments
Plus:
Tax preferences
Equals: AMTI
$
Less:
Exemption
Equals: AMT base
$
Tentative AMT
$
Regular income tax liability
AMT
$
b. What is the total amount of Arthur's tax liability?
$ ( )
Hoffman , Young, Raabe, Maloney, & Nellen, CPAs
5191 Natorp Boulevard
Mason, OH 45040
February 4, 2016
Mr. Arthur Wesson
100 Colonel's Way
Conway, SC 29526
Dear Mr. Wesson:
As you requested, we have calculated your Federal tax liability for 2015. The total amount is $ ( ). This consists of the regular income tax liability of $( ) and the alternative minimum tax (AMT) liability of $ ( ). The calculation of the regular income tax liability appears on Form 1040.
Because this is the first year you have been subject to the AMT, I thought I should comment on this additional tax. The calculation of the AMT appears on Form 6251. The AMT is a parallel income tax system. Its purpose is to provide assurance that no taxpayer with substantial economic income can avoid significant tax liability by using exclusions, deductions, and credits. As indicated on Form 6251, some of the exclusions and deductions on your Form 1040 are disallowed on your Form 6251. These items serve to increase your regular taxable income amount and, as a result, have put you in AMT in 2015.
I would like to work with you to minimize your AMT in the future. Because this is our first year to do tax compliance work for you, we may be able to incorporate some tax planning to reduce your Federal tax liability. Please call me so that we can schedule a meeting at a time that is convenient for you.
Sincerely,
Steve Ash, CPA
Partner
Arthur's taxable income (before personal exemption)
Plus:
Positive AMT adjustments
Plus:
Tax preferences
Equals: AMTI
$
Less:
Exemption
Equals: AMT base
$
Tentative AMT
$
Regular income tax liability
AMT
$
Explanation / Answer
Answer:a
Calculation of regular income tax liability:
Tax on $160,000:
On $90750 $ 18481.25
On $69250 × 28% $ 19390
$37871.25
Calculation of AMT:
Rate:
26% × $185400 $48204
28% × $29950 8386
Tentative AMT $ 56590
Regular income tax liability ($37871.25)
AMT $18618.75
Answer:b Arthur’s total tax liability is $56590, the summation of the regular tax liability of $37871.25 and the AMT of $18618.75.
Taxable income 164000 Positive AMT adjustments 40000 Tax preferences 35000 AMTI 239000 Exemption [$53600-25%(239000-119200)] -23650 AMT base 215350Related Questions
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