Corp reports -
Taxable income 300,000
Interest on private activity bonds 20,000
Life insurance proceeds 250,000
Dividends-received deduction 50,000
Depreciation claimed for:
Taxable income purposes 175,000
AMT purposes 130,000
Adjusted current earnings 800,000
What is th e alternative minimum tax liability?
Hmm... I think its yellow
To calculate the alternative minimum tax (AMT) liability, we need to determine the alternative minimum taxable income (AMTI) and then apply the applicable AMT rate.
To find the AMTI, we need to make adjustments to the regular taxable income. Here are the steps to calculate AMTI based on the provided information:
1. Start with the taxable income: $300,000
2. Add back the amount of interest on private activity bonds: $20,000
- AMTI: $300,000 + $20,000 = $320,000
3. Subtract life insurance proceeds (this is a tax preference item excluded from AMTI): $250,000
- AMTI: $320,000 - $250,000 = $70,000
4. Subtract the dividends-received deduction: $50,000
- AMTI: $70,000 - $50,000 = $20,000
5. Add back the depreciation claimed for AMT purposes: $130,000
- AMTI: $20,000 + $130,000 = $150,000
Now that we have calculated the AMTI, we can determine the AMT liability. The AMT rate for corporations is 20%.
AMT liability: AMTI * AMT rate
AMT liability: $150,000 * 0.20 = $30,000
Therefore, the alternative minimum tax liability for this corporation is $30,000.