Question & Answer: The following is a difference between capital gains treatment for regular tax purposes and AMT purposes……

1. The following is a difference between capital gains treatment for regular tax purposes and AMT purposes.

 

Long-term capital gains are taxed at favorable rates for regular tax purposes, but not AMT purposes.

 

Long-term capital gains are typically subject to state income taxes which are not deductible for AMT purposes.

 

Fifty percent of the long-term capital gains on the sale of Section 1202 small business stock is excluded from the tax base for regular tax purposes, but not for AMT purposes, because 10 percent of the gain is a preference item.

 

Two of the above.

2. A consequence of electing to include long-term capital gains and qualified dividends in net investment income is:

 

Long-term capital gains and qualified dividends are taxed at the 15-percent preferential rate for regular tax purposes, but ordinary income rates for AMT purposes.

 

Long-term capital gains and qualified dividends are taxed at ordinary income rates for both regular and AMT purposes.

 

The taxpayer will likely receive an enhanced investment interest expense deduction for both regular and AMT purposes.

 

Two of the above.

Expert Answer

 

1 Ans: The following is a difference between capital gains treatment for regular tax purposes and AMT purposes.

Here options 1 and 3 are correct ie.,

Long-term capital gains are taxed at favorable rates for regular tax purposes, but not AMT purposes.

Fifty percent of the long-term capital gains on the sale of Section 1202 small business stock is excluded from the tax base for regular tax purposes, but not for AMT purposes, because 10 percent of the gain is a preference item.

2. A consequence of electing to include long-term capital gains and qualified dividends in net investment income is:

Here options 1 and 3 are correct

Long-term capital gains and qualified dividends are taxed at the 15-percent preferential rate for regular tax purposes, but ordinary income rates for AMT purposes.

The taxpayer will likely receive an enhanced investment interest expense deduction for both regular and AMT purposes.

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