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ACC 455 Week 5 Chapter 5 Discussion Questions
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Check My Assignment!Access p. 5-38 in Chapter 5 of your textbook Prentice Hall’s Federal Taxation 2016 Corporations, Partnerships, Estates & Trusts.
Write answers to questions C:5-1 through C:5-10.
Click the Assignment Files tab to submit your assignment as a Microsoft® Word document.
C:5-1 Explain Congress’ intent for enacting the AMT.
C:5-2 Define the following terms relating to the AMT:
C:5-3 Dunn Corporation is not a small corporation exempt from the AMT. Dunn’s CPA does not calculate the AMT because he knows that Dunn’s taxable income is less than the $40,000 AMT exemption amount allowed to corporations. Is the CPA correct in his belief? Explain.
C:5-4 What special rules (if any) apply to the AMT calculation for the following entities:
C:5-5 Agnew Corporation operates a small manufacturing business. During Year 1 (its first tax year, which is 12 months long), Agnew sells goods for $3.8 million for which the cost of goods sold is $2.8 million. Agnew’s owner estimates that future sales and cost of goods sold will grow by 25% each year. Agnew is not related to any other corporations. Is Agnew exempt from the AMT in Year 1? In any of the next five years? Explain.
C:5-6 Menifee Corporation has conducted business for several years, and its annual gross receipts never have been more than $4 million. Jackie, who has owned all of Menifee’s stock since she incorporated it, purchases all of Estill Corporation’s stock in the current year. Estill’s annual gross receipts have been approximately $6 million in recent years.
C:5-6 Menifee Corporation has conducted business for several years, and its annual gross receipts never have been more than $4 million. Jackie, who has owned all of Menifee’s stock since she incorporated it, purchases all of Estill Corporation’s stock in the current year. Estill’s annual gross receipts have been approximately $6 million in recent years. Explain to Jackie how her acquisition of Estill’s stock will affect the AMT that Menifee pays.
C:5-7 Determine whether the following statements relating to the AMT for a corporation are true or false. If false, explain why.
C:5-8 Identify each of the following as a tax preference item (PREF), an AMT adjustment item to calculate preadjustment AMTI (ADJ), an item to adjust from preadjustment AMTI to ACE (ACE), or none of these (NONE):
C:5-9 What adjustment does a corporation make if ACE is more than preadjustment AMTI? If ACE is less than preadjustment AMTI?
C:5-10 Florida Corporation incurs AMT for the first time in the current year. The main reason for incurring the AMT is a $2 million gain on a current year installment sale that Florida is recognizing over ten years for regular tax purposes. Explain to Florida’s president how the installment sale can cause Florida to incur the AMT, how its treatment for ACE is similar to and different from the E&P treatment with which she is familiar, and whether its ACE treatment will partially or completely reverse in future years.
