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Unformatted text preview: C5-1Chapter 5: Other Corporate Tax LeviesHomework solutions:C5-6c and e are true. a, b, and d are false. For statement a, tax preference items can only increasetaxable income, and thus can only increase AMTI (p. C5-4). For statement b, an alternative tax NOLdeduction must be computed which is adjusted in the same way that taxable income is adjusted toarrive at AMTI (p. C5-6). For statement d, the general business credit can offset the corporation'snet income tax that is in excess of the greater of (1) the tentative minimum tax or (2) 25% of its netregular tax liability in excess of $25,000. pp. C5-12 and C5-13.C5-10Included In:Taxable IncomePre-Adjustment AMTIACEa.NoYesYesb.NoNoYesc.YesYesYesd.YesaYesaYesae.YesYesbNocf.YesYesNog.YesYesNodaOnly the gain related to the current year installment sale collections is included in taxable income andpre-adjustment AMTI. The entire gain is included in ACE.bExcess intangible drilling costs (IDCs) are a tax preference item which increases AMTI. The excessIDC preference is repealed for oil and gas activities (other than for integrated oil companies) for taxyears after 1992.cIntangible drilling costs are amortized over a 60-month or longer period.dOnly the 80% and 100% dividends-received deductions are allowed when computing ACE. Dividends from a 10%-owned corporation are only eligible for a 70% dividend-received deduction.C5-30a.Taxable income$ 700,000 Plus: Tax preference items300,000 Positive adjustments600,000 AMTI$1,600,000 b.Minus: Statutory exemption( -0- ) Tax base$1,600,000 Times: Tax ratex 0.20 Tentative minimum tax$ 320,000 c.Minus: Regular tax amount( 238,000)ad.AMT liability$ 82,000 a$700,000 x 0.34 = $238,000....
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This note was uploaded on 02/08/2009 for the course ACCOUNTING ACC 579 taught by Professor Smith during the Spring '08 term at University of Phoenix.
- Spring '08