[Ken]

Hi,

I have this question when I was working on Wiley CPA excel and I don’t know why the answer is not $3100 instead of $7000.

Here is the question:

When determining his federal income tax, Curt had the following items for 2013:

Personal exemption $3,900

Itemized deduction for personal property taxes 2,500

Charitable contribution of capital gain property 1,500

Net long-term capital gain 1,000

Excess of MACRS depreciation on personal property over depreciation computed using the 150% declining-balance method 600

Tax-exempt interest from City of Chicago general obligation bonds 400

What is the total amount of adjustments to taxable income for purposes of computing Curt’s alternative minimum tax for 2013?

$3,100

$7,000

$7,200

$7,800

The correct answer from Wiley is C when they added together Personal Exemption, Itemized Deduction and Macr Depreciation ( 3900+2500+600 = 7000). Can you please explain why the Personal Exemption is allowed in the calculation? I went back to the Roger book and this is what it said:

“Personal and Dependent exemption are not allowed ( there is a much larger exemption available against AMTI)”

So why Personal Exemption is in the calcution?

REG : 62, 67, 81. Tick- Expire 01/02/2016
BEC : 72, 67,71,76. Tick Expire 10/25/2015
AUD : 60, 62, 62, 74(8/30) - 10/1/2015 - oh geez
FAR : 68, 64, 72(7/24) - 10/20/2015- oh geez

I am WHINING...

" Just take it without worrying about the 75. Man, that is not easy!"

[MikeHoncho]

Personal exemptions and standard deductions are added back since they are not allowed

Done: 5/22/14

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut."
- Ernest Hemingway

[MikeHoncho]

Personal exemptions and standard deductions are added back since they are not allowed

Done: 5/22/14

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut."
- Ernest Hemingway

[Vlakmir]

By “not allowed”

they mean when calculating AMTI, those deductions (personal exemption, Itemized, Depr in Excess of Straight line) is -not- allowed, and therefore you add them back to get AMTI.

Think of where you are starting and where you are going.

If you were to start from scratch, your AMTI would start from gross income, then take deductions – The personal exemption, excess of S/L, and most itemized decutions are -not- allowed to be taken as deductions.

Since you are not starting from scratch, you are starting from taxable income where you TOOK those deductions, you are converting it to AMTI, so you must add back the unallowed deductions.

A = Gross Income, B = Deductions, TI = Taxable income, AMTI = Alt min tax income.

A-B=TI

A-allowed B deductions=AMTI

To go from TI to AMTI, you have to Add back the deductions that are not allowed for AMTI purposes.

Cheers.

REG - 92
AUD - 90
BEC - 82
FAR - 82
BISK Review Materials
DONE! /Happydance

[Vlakmir]

By “not allowed”

they mean when calculating AMTI, those deductions (personal exemption, Itemized, Depr in Excess of Straight line) is -not- allowed, and therefore you add them back to get AMTI.

Think of where you are starting and where you are going.

If you were to start from scratch, your AMTI would start from gross income, then take deductions – The personal exemption, excess of S/L, and most itemized decutions are -not- allowed to be taken as deductions.

Since you are not starting from scratch, you are starting from taxable income where you TOOK those deductions, you are converting it to AMTI, so you must add back the unallowed deductions.

A = Gross Income, B = Deductions, TI = Taxable income, AMTI = Alt min tax income.

A-B=TI

A-allowed B deductions=AMTI

To go from TI to AMTI, you have to Add back the deductions that are not allowed for AMTI purposes.

Cheers.

REG - 92
AUD - 90
BEC - 82
FAR - 82
BISK Review Materials
DONE! /Happydance

[Author]

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