Alternative Minimum Tax - Answer Key

1. C

Private activity bond interest is an AMT preference item, but public purpose municipal bond interest is not. 2. A

From the list above, only the deferral of exercising incentive stock options will reduce taxable income and lower the AMT exposure. Married filing separately status always has the lowest exclusion amount, so that will not help reduce the AMT.

3.
C

C-Corporations with less than $5 million in gross receipts during their first year of existence will be exempt from AMT in the second year of operation.

4.
D

Incentive stock options are classified as a deferral item, not an exclusion item.

5.
B

The personal exemption, standard deduction, itemized deduction and percentage depletion are all common "exclusion items," not "deferral items."

Introduction

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