Question

If a taxpayer uses regular MACRS for 15 and 20-year class property, is an alternative minimum tax adjustment necessary with respect to the depreciation on that property?

1) True
2) False

Answer 1

If a taxpayer uses regular MACRS for 15 and 20-year class property, no alternative minimum tax adjustment is necessary.

Step-by-step explanation:

If a taxpayer uses regular MACRS for 15 and 20-year class property, an alternative minimum tax (AMT) adjustment is not necessary with respect to the depreciation on that property. This is because the AMT system adopts its own depreciation method called the Alternative Depreciation System (ADS), which is different from the regular MACRS.

The regular MACRS allows for accelerated depreciation deductions over the prescribed recovery periods, while the AMT requires a generally slower recovery method. The AMT adjustment ensures that taxpayers do not receive a double benefit from the accelerated depreciation under the regular MACRS. However, since the taxpayer is already using the regular MACRS for the 15 and 20-year class property, there is no need for an AMT adjustment as the depreciation deductions are already being calculated according to the regular MACRS rules.