Quiz Chapter C5 Quiz Submit Quiz This Question 1 pt 6 of 7 3

Quiz: Chapter C:5 Quiz Submit Quiz This Question: 1 pt 6 of 7 (3 complete) This Quiz: 7 pts possibl ldentify each of the following as a tax preference item (PREF), an AMI adjustment item to calculate preadjustment AMTI (ADJ), an item to adjust from preadjustment AMTI to ACE (ACE), or none of these (NONE) Select from the following table.) Identity choice More Info Percentage depletion in excess of a property\'s adjusted basis at the beginning of the tax year (assume the corporation is not an independent producer) a. b. MACRS depreciation deducted on a machine placed in service in the current year (assumeb. the corporation elects bonus depreciation, if available) PREF = tax preference item (PREF) ADJ AMT adjustment item to calculate preadjustment AMTI ACE -An item to adjust from preadjustment AMTI to ACE NONE none of these C. c. Sec. 179 expense deducted on delivery trucks placed in service in the current year d. Gain or loss realized on the sale of a machine placed in service four years ago e. Tax-exempt interest earned on State of Michigan private activity bonds (assume the bondse were issued after 2010) Tax-exempt interest earned on State of Michigan general revenue bonds (assume the bonds were issued after 2010) Long-term contract for which the taxpayer uses the completed contract method (assume average gross receipts for the three preceding tax years are $10 million or less) f. g. Print Done Choose from any drop-down list and then continue to the next question Type here to search

Solution

Tax Preference Item a.Percentage depletion in excess of a property’s adjusted basis at the beginning of the tax year PREF - excess depletion is a tax preference item as it is an item added to regular taxable income by the taxpayer when calculating alternative minimum taxable income (AMTI) b.MACRS depreciation deducted on a machine placed in service in the current year None - unless the taxpayer elects out of bonus depreciation or the equipment does not qualify for deductions c.Sec. 179 expense deducted on delivery trucks placed in service in the current year None - The section 179 deduction taken on equipment placed into service in the current year is none of these deductions. d.Gain or loss realized on the sale of a machine placed in service four years ago. ADJ – A recognized gain or loss on the sale of equipment is an AMT adjustment item. e. Tax-exempt interest earned on State of Michigan private activity bonds PREF – The interest earned on private activity state bonds is a tax preference item. f. Tax-exempt interest earned on State of Michigan general revenue bonds ACE – The interest earned on the general revenue state bonds is an ACE adjustment item. The ACE adjustment, although often positive, can be positive or negative, but the negative adjustment cannot exceed the cumulative ACE adjustment amount from all previous years. g.Long-term contract for which the taxpayer uses the completed contract method ADJ – A long-term contract when using the completed contract method is an AMT adjustment item.