Alternative Minimum Tax - Sample Questions 1 - 5

1. All of the following are AMT preference items EXCEPT:

A) Private purpose municipal bond interest
Percentage depletion
Public purpose municipal bond interest
Bargain element on the exercise of an incentive stock option

2. Which of the following is a valid planning tip to help a taxpayer avoid AMT?

A) Defer the exercise of incentive stock options
Invest in high dividend paying stocks
Buy private activity municipal bonds
D) File married filing separately for a higher exclusion amount

3. Which of the following are exempt from AMT liability?

I. S-Corporations
II. C-Corporations in their first year of existence
III. Qualified Public Charities
IV. C-Corporation with less than $7,500,000 of gross receipts in their first year of existence will be exempt in year two.

A) I and II only
I and III only
I, II and III
D) I, II, III and IV

4. All of the following are true statements regarding AMT EXCEPT?

A) AMT tax rates are 26 and 28%.
Tax-exempt interest from a private activity bond is a preference item.
AMT liability is calculated on IRS Form 6251 for the individual tax filer.
D) Incentive stock options are considered an exclusion item.

5. All of the following are common "deferral items" EXCEPT?

A) Depreciation
Standard deduction
Intangible drilling costs
D) Incentive stock options

Answer Key
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