Question

12. Which of the following statements about the alternative minimum tax (AMT) is true?

    1. A) The AMT was established to enforce tax laws and punish tax evaders.

    2. B) The AMT was indexed to inflation.

    3. C) The AMT will affect more and more people because wages have risen significantly

       faster than have prices.

    4. D) Both B and C are true.

    5. E) None of the answers is true.

Answer 1

Answer :- D (Both B nd C are true )

Explanation :-

First of all, we understand the alternative minimum tax (AMT), so that we can solve this question easily.

AMT ensures that certain taxpayers pay their fair share or at least the minimum.
For 2019, the AMT exemption for married joint filers is $111,700; for 2020, it's $113,400.
In 2015, Congress passed a law which indexed the exemption amount to inflation to help upper middle income taxpayers from experiencing bracket creep.
AMT is designed to prevent taxpayers from escaping their fair share of tax liability through tax breaks. However, the structure was not indexed to inflation or tax cuts. This can cause bracket creep, a condition in which upper-middle-income taxpayers are subject to this tax instead of just the wealthy taxpayers for whom AMT was invented. In 2015, however, Congress passed a law indexing the AMT exemption amount to inflation.

Tax preference items may include net income from oil and gas deposits, deductions from accelerated depreciation, the exercise of stock options, and investment tax credits, among others.

Tax preference items include interest on private activity municipal-bonds, qualifying exclusions for small business stock, and excess intangible drilling costs for oil and gas - if the amount of these items exceeds 40% of AMT income. Tax preference items are added to the amount of AMT income in the IRS' tax formula.