Question

James and Jane filed a joint return in 2018. They calculate their taxable income to be $150,000 and regular tax to be $33,000. Assume that:

Their AMT adjustments to taxable income                $20,000

Their total of tax preference items                             $30,000

AMT exemption                                                         $109,400

The AMT tax rate:

• 26% of alternative minimum taxable income (AMTI) up to $191,500 for all taxpayers ($95,750 for married taxpayers filing separately)
• and 28% of AMTI exceeding that amount

1. What is their alternative minimum taxable income (AMTI) after AMT exemption?
2. What is their tentative minimum tax?
3. What is the amount of tax they must pay in 2018?

Answer 1

James and Jain filing joint return:
a. Calculation of AMTI after AMT exemption:
	Amount($)
Taxable Income	150000
Less:AMT adjustments to taxable income	20000
	130000
Add: Tax preference items	30000
Alternative Minimum Taxable Income(AMTI)	160000
AMT exemption	109400
AMTI after AMT Exemption	50600
b. Calculation of tentative minimum tax
AMTI	160000
Less: Basic exemption	109400
	50600
Tax@26% on above	13156
c. Caculation of the amount of tax to be paid in 2018
Tentative minimum tax	13156
Regualar income tax	33000
The tax to be paid is the higher of Tentative minimum tax and Regualr
Income tax- $ 33000