Compute their tentative minimum tax
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56. Rosa and Steve, who are married, had taxable income of $225,000 for 2005. They had positive AMT adjustments of $40,000, negative AMT adjustments of $10,000, and tax preference items of $67,500.
a. Compute their AMTI.
b. Compute their tentative minimum tax.
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Calculating AMT tax liability involves four general steps:
? Individuals must make specific adjustments to their taxable income as calculated under the regular income tax system. These AMT adjustments can be positive or negative.
? Individuals must also add in certain AMT preference items to determine alternative minimum taxable income (AMTI).
Tax preference items are items, such as accelerated depreciation, percentage depletion, or certain tax-exempt income, that are considered to have favorable tax treatment and could trigger the alternative minimum tax.
a. Compute their AMTI.
$225,000 + $40,000 - $10,000 - $67,500 = $187,500
? ...
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