Financial Planner

Answer: A - Alternative Minimum Tax (AMT) is considered a parallel income tax system. It applies when the calculation of AMT results in a higher tax liability than the calculation of regular income taxation. The purpose is to ensure that an individual does not lower his or her tax liability below a reasonable level by using certain tax benefits targeted by AMT. Certain tax benefits available under regular income taxation are not available under AMT. It is mandatory tax paid only if it exceeds the regular tax liability. It is not an “alternative” or optional tax.