Select the best answer Rodger age 16 has earned income of 60

Select the best answer. Rodger (age 16) has earned income of $6,000 and unearned income of $56,000. What amount is subject to AMT in 2018? ? A. $7,600 O B. $13,600 O C. $42,350 O D. $56,000 Submit Answers Exit & Resume Later 99% Complete Exam, Question Q 3

Solution

Alternative minimum tax

  It is an alternative method for calculating tax liability. It recalculates income tax after adding certain tax preferences. back into adjusted gross income.

Calcualtion of AMT

Regular taxable income = XXXX

+/- Adjustments like state and local taxes and medical expenses and so on ., = XXXX

Alternative minimum taxable income = XXXX

- Exemptions allowed in regular taxable income = XXXX

Tax Base = XXXX

alternative minimum tax = Tax base*Rate

Here there was no deductions and exemptions given but there was a standard deduction of 12000 is allowed for individuals who were not married. so we should calculate tax at regular rates applicable for the year and then you calculate the alternative minimum tax for such income then if AMT is more than tax on tax on standard tax rates then AMT to be paid by such individual . The tax rate should be @26% if such unmarried individual income exceeds$70300. There fore the taxable income of Rodger will be liable to AMT . The total taxable income will be $7600