Explore BrainMass

Compute their tentative minimum tax

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.

Solution Preview

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

? ...

Solution Summary

This solution is comprised of a detailed explanation to answer the request of the assignment of more than 500 words of text.