Question

Explain in your own words the alternative minimum tax (AMT) and include in your definition: (a) why was it implemented by the IRS, (b) who was the original targets of the AMT, (c) how it is calculated, and (d) whether you think it was fair to implement the tax, why or why not.

Answer 1

Ang Alternative Minimum Tan The alternative minimum tan (AMT) is an income tan calculated using a different set of reales meant to ensure that certain tan-payers pay at least a minimum amount of tan. The AMT Calculations limit certain tan benefits for some taxpayers so that their income tan liabilities are highen. Those an- -Payers, who typically have relatively high incomes essentially calculate their income tax twice - under regular tax rules and unden the stricter AMT roles - and then pay the higher amount owed and @ In simple terms, AMT was introduced to make a fair tan system which ensures that the wealthy pay their fair shane of income tan no matter how many deductions they claim. (6) & The main purpose of AMT was to target high-income tanpayers who were claiming many credits and deductions, finally end up owing little or no income tan.

c) How to calculate AMTI ? There are which are as below u steps to calculating AMTI - O Calculate tanable income under the regular system. (2) Add deductions and breaks that have taken under the regular system. This will determine Alternative Minimum Tanable Income (AMTI), Subtreach acconding the enemptions amount mentioned above to the filing status. " Applying the and calculate applicable AMT tan nate AMT liability. mote! If the amount received under AMT calculation is higher than than the regular system calculation, then the tanpayen has to pay the higher amount (i) It is faire to implement the tan (AMT), because the AMT is designed to prevent people from using loopholes in the tane to avoid tan. (1) The who on AMT should not applicable to those live in high -tan states and b. have langer familibs.

for ename, people who live in the state of Now New York pay ang where from ay to 8.8% in state income tanes people who live in New York city will pay additional local city income tanes. While State and local tanes can be deducted from income tages, the AMT bars these deductions. Therefore, many New York tanpayers who are subject to AMT would not be, had they lived in a state with lower state income tax rates annon

Again the most deductions the AMI, lange son families pay dependants AMT is because are barned unden