Question

1.Archie runs a small mineral exploration business (as a sole proprietorship). In 2016, he purchased land (for $68,000) where he suspected a magnesium deposit was located. He incurred $18,000 of exploration costs related to the development of the magnesium mine in 2016 and an additional $22,000 of exploration costs in 2017. Archie elected to deduct these expenditures for regular tax purposes in both 2016 and 2017.

In 2018, given a decline in magnesium prices, Archie chose to sell the property for $66,000, rather than bring the mine to production. What AMT adjustments are required in 2018 related to mine exploration expenditures and the sale of the land?

As a result, in 2018 a $........... negative  AMT adjustment is required for mine exploration expenditures and a
$........... negative  AMT adjustment for the sale of the land.

Answer 1

The AMT exemption for 2018 is $ 70300. In case the cost of the land of $68000 is considered and sale of property at $66000 following will be the negative AMT adjustment.

Particulars	$ Value	AMT
Sale Price	66000
Deductions for exploration cost	40000
Sale Price for Land (A)	26000
Purchase price for land (B)	68000
Negative AMT for Land (A-B)		42000
Negative AMT for Mine Exploration = Deductions for exploration		40000

So as per table above, Negative AMT for Land id $42000 and for Mine exploration is$ 40000