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1. Which of the following is a common AMT adjustment:
The difference between the fair market value and exercise price of an incentive stock option.
Tax-exempt bond interest that is private activity bond interest.
The deduction for state and local taxes paid.
Two of the above.
2. The following describes the Alternative Minimum Tax Credit:
It may be used to offset the taxpayer’s regular tax liability.
It may be used to offset the taxpayer’s tentative minimum tax liability.
It allows the taxpayer a credit against his or her regular tax liability for AMT taxes paid as a result of a permanent adjustment or preference item.
The credit may be carried forward for five years.
Expert Answer
1. Which of the following is a common AMT adjustment:
The difference between the fair market value and exercise price of an incentive stock option.
For regular tax purposes, a taxpayer is not required to adjust the difference between option price and FMV of the underlying stock at the time of exercise in income in the year of exercise but for AMT purpose, this difference should be included in income in the year of exercise.
2. The following describes the Alternative Minimum Tax Credit:
It may be used to offset the taxpayer’s regular tax liability and can be carried forward for six years.
