Practice Quiz

Financial Planner

Category - Tax Planning

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Which of the following is true regarding the alternative minimum tax?
  1. The alternative minimum tax encourages taxpayers to take advantage of tax relief incentives
  2. The alternative minimum tax is an additional tax paid on certain preference items
  3. The alternative minimum tax is a parallel tax system that is used to ensure that taxpayers pay less tax, if able
  4. The alternative minimum tax is a parallel tax system used to ensure that taxpayers with certain preference items pay a minimum amount of tax
Explanation
Answer: D - The alternative minimum tax is designed to keep taxpayers from overly taking advantage of tax incentives. When a version of it was first enacted, it was an additional tax focused on certain preferences. However, today, it is a parallel system used to ensure that taxpayers with certain preference items pay a minimum amount of tax.
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