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Exam 17: Tax Credits and Corporate Alternative Minimum Tax

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Question 41

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A LIFO method is applied to general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.

A) True
B) False

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Question 42

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Tanver Corporation, a calendar year corporation, has alternative minimum taxable income of $7 million in 2017 (before adjustment for adjusted current earnings) .If Tanver's adjusted current earnings is $16 million, its tentative minimum tax for 2017 is:

A) $310,000.
B) $2,750,000.
C) $6,750,000.
D) $7,000,000.
E) Some other amount.

F) A) and B)
G) A) and C)

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Question 43

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How can the positive AMT adjustment for research and experimental expenditures be avoided?

In deciding to enact the alternative minimum tax, Congress was concerned about the inequity that resulted when taxpayers with substantial economic incomes could avoid paying regular income tax.

AMT adjustments can be positive or negative, whereas AMT preferences are always positive.

The disabled access credit was enacted to encourage small businesses to make their businesses more accessible to disabled individuals.

Joel placed real property in service in 2017 that cost $900,000 and used MACRS depreciation for regular income tax purposes.He is required to make a positive adjustment for AMT purposes in 2017 for the excess of depreciation calculated for regular income tax purposes over the depreciation calculated for AMT purposes.

Cardinal Company incurs $800,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours.Assuming Cardinal claims the credit for employer-provided child care this year, its basis in the newly constructed facility is $640,000.

Business tax credits reduce the AMT and the regular income tax in the same way.

Paul incurred circulation expenditures of $180,000 in 2017 and deducted that amount for regular income tax purposes.Paul has a $60,000 negative AMT adjustment for each of 2018, 2019, and for 2020.

Mauve, Inc., records the following gross receipts in 2015, 2016, and 2017. $\begin{array} { l }2015&2016\\\$4,900,000&\$8,700,000\\\end{array}$ $\text { What is Mauve, Inc.'s TMT in each of these three years? }$ $\begin{array}{ccc}2015 & \mathbf{2 0 1 6} & \mathbf{2 0 1 7} \\\text { a. } \$ 0 & \$ 0 & \$ 0 \\\text { b. } \$ 0 & \$ 0 & \$ 1,160,000 \\\text { c. } \$ 0 & \$ 1,740,000 & \$ 1,160,000 \\\text { d. } \$ 980,000 & \$ 1,740,000 & \$ 1,160,000 \\\text { e. } \$ 0 & \$ 1,740,000 & \$ 0\end{array}$

A small employer incurs $1,500 for consulting fees related to establishing a qualified retirement plan for its 75 employees.As a result, the employer may claim the credit for small employer pension plan startup costs for $750.

All taxpayers are eligible to take the basic research credit.

Qualified rehabilitation expenditures include the cost of acquiring the building, but not the cost of acquiring the land.

During 2017, Red Corporation (a calendar year taxpayer) has $4,000,000 of taxable income and the following transactions: ? $\begin{array}{ll}\text { AMTI (not including adjusted current earnings) } & \$ 5,000,000 \\\text { Adjusted current earnings } & 8,000,000\end{array}$ Red Corporation's alternative minimum tax (AMT) for 2017 is:

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.

A negative ACE adjustment is beneficial to a corporation.

Because passive losses are not deductible in computing either taxable income or AMTI, no AMT adjustment for passive losses is required.

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

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