Problem 12-55 (LO. 2, 5) Renee and Sanjeev Patel, who are married reported taxab
ID: 2577469 • Letter: P
Question
Problem 12-55 (LO. 2, 5) Renee and Sanjeev Patel, who are married reported taxable income of $273,000 for 2017. They incurred positive AMT adjustments of $38,000, negative AMT adjustments of $14,000, and tax preference items of $67,500. Assume the Patels itemize their deductions a. Compute the Patels' alternative minimum taxable income (AMTI) for 2017 Taxable income (before exemptions) Plus: positive AMT adjustments negative AMT adjustments preference items 38,000 14,000 67,500 Less: Plus: Equals : AMTI b. Will Renee and Sanjeev's AMT exemption be limited for 2017? Their tentative exemption of is at a rate of 25 cents on the dollar when AMTI exceeds As a result, their AMT exemption is When computing their tentative minimum tax, the first $187,800 of AMTI will be taxed at 96, and any excess over $187,800 will be taxed at %. Therefore, the total tentative minimum tax is $Explanation / Answer
(a)
Computation of Patel’s Alternative Minimum taxable Income (AMTI) for 2017
Taxable income (before exemptions)
$273,000
Plus: positive AMT adjustments
38,000
Less: negative AMT adjustments
(14,000)
Plus: Preference items
67,500
Equals : AMTI
$ 364,500
(b)
Their tentative exemption of $ 84,500 is phased out at a rate of 25 percents on the dollar when AMTI exceeds $160,900 as a result, their AMT exemption is 33,600.
The initial exemption amounts for 2017 are as follows:
Status
Exemption
Phase out
begins at
ends at
Married , jointly
$84500
$160900
$498900
When computing their tentative minimum tax, the first $ 187,800 of AMTI will be taxed at 26 % and any excess over $187,800 will be taxed at 28 %. Therefore, the total tentative minimum tax is $ $88,896.
Taxable income (before exemptions)
Plus: positive AMT adjustments
38,000
Less: negative AMT adjustments
14,000
PLUs: Preference items
67,500
Equals : AMTI
$ 364,500
Less: AMT exemption ( as per above calculation)
$33,600
AMT base
$330900
Rate: 26%
on 1st 187,800 (187800 X 26%)
$48,828
on remaining balance ($330,900 - $187,500) 143,100 X 28%
$40,068
total amount = ($48828 +$40,068) = $88,896
total amount = ($48828 + $40,068) = $88,896
$187800 x.26 = $48828
$ 330,900 - $187800 = $143,100
$143,100 X .28 = $40,068
Total minimum tax = $48828 + $40,068 = $88,896
Taxable income (before exemptions)
$273,000
Plus: positive AMT adjustments
38,000
Less: negative AMT adjustments
(14,000)
Plus: Preference items
67,500
Equals : AMTI
$ 364,500