[Anonymous]

Hi all,

I came across the following question in my Wiley CPA REG book:

The alternative minimum tax is computed as the

A. Excess of the regular tax over the tentative AMT

B. Excess of the tentative AMT over the regular tax

C. The tentative AMT plus the regular tax

D. Lesser of the tentative AMT or the regular tax

Apparently, the correct answer is (B). Now unless I have completely understood AMT, I believe that non of theses answers are correct. I was under the illusion that our AMT is the greater of our regular tax OR our tentative AMT.

The Wiley answer states that it is the EXCESS of the tentative AMT OVER the regular tax. To me, this answer implies that the AMT is: AMT – regular tax, rather than the actual AMT if it is greater than the regular tax.

Any thoughts on this. Am I wrong here….

Thanks.

[TigerWoods]

I'm not sure I fully understand. AMTI (Alternative Minimum Taxable Income) is your taxable income with adjustments and preferences factored in. The amount of AMTI over regular taxable income is the AMT (alternative minimum tax) that you must pay in addition to your taxable income.

[leglock]

Charlie,

AMT is not the greater of what you stated. I always thought this too, but in actuality, by rule, it is the excess tentative over regular tax. In a year where AMT is applicable, the total tax to be paid will equal the tentative amount; however only the portion in excess of regular tax is considered AMT.

This distinction is important as AMT paid in one year can be carried forward in future years against regular tax (in years when no AMT is assessed). Therefore, the amount allowed to be carried forward is only the excess not the entire taxes paid.

[Anonymous]

@leglock, thanks for the clarification

[Author]

Replies