[Anonymous]

Eastern Corp., a calendar year corporation, was formed January 3, Year 1, and on that date placed five-year property in service.

The property was depreciated under the general MACRS system. Eastern did not elect to use the straight-line method. The

following information pertains to Eastern:

Eastern’s Year 1 taxable income $300,000

Adjustment for the accelerated depreciation taken on Year 1 five‐year property 1,000

Year 1 tax‐exempt interest from specified private activity bonds issued 5,000

What was Eastern’s Year 1 alternative minimum taxable income before the adjusted current earnings (ACE) adjustment?

a. $306,000

b. $305,000

c. $304,000

d. $301,000

the answer is A.

why did accelerated depreciation add back to taxable income. I am so connfused with this question…

[Gerg, CPA]

essentially, AMT does not allow accelerated depreciation. for amt purposes, most assets must be depreciated using the straight-line method. accelerated deprecation lets you take more of a deduction in the beginning of the asset's life than SL. so you have to adjust your Alt min taxable income for this

FAR - 1/26/2012 - PASSED (78, but Lost credit), re-do 11/27/2013 - PASSED (87)!
AUD - EPIC FAIL, 71, 69; 68; 5/25/2013 - PASSED (85)!
REG - 10/1/2012 - 72; 7/1/2013 - 73 UGH, 10/1/2013 - PASSED (85)!
BEC - 2/28/2013 - PASSED (82)!
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Used Becker self-study materials (just this for FAR original & REG #1), WileyTestBank, NINJA notes/audio, and Roger cram course for AUD #5, REG #3 & FAR reboot. CPA!

[Author]

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