Fair market value at the date of conversion

Question

Question 1: All of a corporation's AMT is available for carryover as a minimum tax credit regardless of whether the adjustments and preferences originate from timing differences or AMT exclusions.

• True
• False

Question 2: In calculating the adjusted basis of property, the basis is reduced by the lesser of the cost recovery allowed or allowable.

• True
• False

Question 3: Property received as a gift can be sold by a donee and result in neither recognized gain nor loss.

• True
• False

Question 4: The basis of property acquired in a wash sale is its cost plus the loss recognized on the wash sale.

• True
• False

Question 5: Property that has been converted from personal use to business or income-producing use will be dual basis property if the adjusted basis exceeds the fair market value at the date of conversion.

• True
• False

Question 6: In 2008, Ray incurs $60,000 of mining exploration expenditures, and deducts the entire amount for regular income tax purposes. Which of the following statements is incorrect?

a. For AMT purposes, Ray will have a positive adjustment of $54,000 in 2008.
b. Ray will have a negative AMT adjustment of $6,000 in 2013.
c. Over a 10-year period, positive and negative adjustments will net to zero.
d. The AMT adjustment for mining exploration expenditures cannot be avoided if the taxpayer elects to write the expenditures off over a 10-year period.
e. All of the above are correct.

Question 7: In 2008, Fred has a $75,000 loss on a passive activity for regular income tax purposes. For AMT purposes, his loss is $65,000. The amount of the AMT adjustment resulting from the passive activity loss is:

a. $0.
b. $10,000 negative adjustment.
c. $10,000 positive adjustment.
d. $65,000.
e. None of the above.

Question 8: Erin owns a mineral property that had a basis of $10,000 at the beginning of the year. The property qualifies for a 15% depletion rate. Gross income from the property was $120,000 and net income before the percentage depletion deduction was $50,000. What is Erin's tax preference for excess depletion?

a. $8,000
b. $10,000.
c. $18,000.
d. $0.
e. None of the above.

Question 9: Sara is single, has no dependents and does not itemize, provides you with the following information:

Short-term capital loss    $ 5,000
Long-term capital gain     25,000
Municipal bond interest received on private activity bonds acquired in 2003    9,000
Dividends from General Motors    1,500
Excess of FMV over cost of incentive stock options (the rights
became freely transferable in the current year) 35,000

What is the amount of Sara's tax preference items and AMT adjustments for the current year?

a. $9,000.
b. $44,000.
c. $49,350.
d. $52,950.
e. None of the above.

Question 10:

Alice owns land with an adjusted basis of $305,000, subject to a mortgage of $175,000. Real estate taxes are $4,500 per calendar year and are payable on December 31. On April 1, 2008, Alice sells her land subject to the mortgage for $325,000 in cash, a note for $300,000, and property with a fair market value of $60,000. What is the amount realized?

a. $685,000.
b. $686,119.
c. $860,000.
d. $861,119.
e. None of the above.