Question

"Dry Hole, Inc., a calendar year taxpayer, incurs $300,000 in mining explo- ration costs on July 1, 2017, and elects to expense as much as possible of the expenditures. Determine Dry Hole’s regular tax and AMT deductions, and AMT adjustments for corporate deductions and any AMT adjustments."

Answer 1

(A) 29.4 percent of households with “expanded cash income” (which is a broad measure of income) between $200,000 and $500,000 will be affected by the AMT .

(B) The items that are subject to adjustment for AMT for individual taxpayers include:

• The limitation on overall itemized deductions.
• Miscellaneous itemized deductions subject to the 2% floor.
• Standard deduction and personal exemptions.
• Certain state, local and foreign taxes.
• Medical expense etc.   

(C) The corporation is not a “small corporation” exempt from the AMT (as explained below). The corporation's taxable income or (loss) before the net operating loss (NOL) deduction plus its adjustments and preferences total more than $40,000 or, if smaller, its allowable exemption amount.