Question

What is the alternative minimum tax (AMT) consequence when a taxpayer disposes of rental property?

Gains or losses on the sale of assets must be attributed to the underlying source on Form 6251.

It may be necessary to recalculate gain or loss due to AMT.

Sales expenses are disallowed when calculating gain or loss for AMT.

Property tax deductions are disallowed when calculating gain or loss for AMT.

Answer 1

Correct Option is;

It may be necessary to recalculate gain or loss due to AMT.

Explanation:

In general, a taxpayer uses a different method of depreciation for purposes of the Alternative Minimum Tax than is used for Regular Tax purposes. The taxpayer has differences in depreciation of the property in prior years, hence the tax basis of that property is also different for the AMT than it is for the Regular Tax. Therefore, gain or loss on a sale of the property also is different. Hence it is necessary to recalculate the AMT gain or loss.