ExpertMedium1 markMultiple Choice
CPA · Question 03 · Area I: Individual Compliance and Planning
A taxpayer has regular taxable income of $200,000 in Year 1. They claimed a standard deduction of $29,200 (assume this is the correct figure for the scenario). They received $10,000 in interest from private activity bonds (issued in Year 1) and exercised ISOs creating a spread of $15,000. What is the taxpayer's Alternative Minimum Taxable Income (AMTI) before the AMT exemption?
A taxpayer has regular taxable income of $200,000 in Year 1. They claimed a standard deduction of $29,200 (assume this is the correct figure for the scenario). They received $10,000 in interest from private activity bonds (issued in Year 1) and exercised ISOs creating a spread of $15,000. What is the taxpayer's Alternative Minimum Taxable Income (AMTI) before the AMT exemption?
Answer options:
A.
$225,000
B.
$239,200
C.
$244,200
D.
$254,200
How to approach this question
Start with Taxable Income. Add back the Standard Deduction (since it's not allowed for AMT). Add tax preference items (Private Activity Bond interest) and adjustments (ISO spread).
Full Answer
D.$254,200✓ Correct
D
AMTI is calculated starting with Taxable Income ($200,000). Adjustments/Preferences added: 1. Standard Deduction ($29,200) - disallowed for AMT (IRC §56(b)(1)(E)). 2. Private Activity Bond Interest ($10,000) - preference item (IRC §57(a)(5)). 3. ISO Spread ($15,000) - adjustment (IRC §56(b)(3)). Total AMTI = $200,000 + $29,200 + $10,000 + $15,000 = $254,200.
Common mistakes
Forgetting to add back the standard deduction or missing one of the preference items.
Practice the full CPA TCP Practice Exam 3
68 questions · hints · full answers · grading
More questions from this exam
Q01In Year 1, an executive is granted 1,000 Incentive Stock Options (ISOs) with an exercise price of...MediumQ02On January 1, Year 1, a corporation lends $500,000 to a shareholder interest-free. The loan is a ...MediumQ04A U.S. citizen accepts a permanent assignment in France on January 1, Year 1. They are present in...MediumQ05A 12-year-old child has $5,000 of interest income and no earned income in Year 1. Assume the stan...HardQ06A taxpayer with an AGI of $200,000 wants to make a charitable contribution to a public charity. T...Hard