Question

How is the NOL deduction treated under AMT purposes?

A) NOL deduction is not allowed under AMT.

B) NOL deduction is allowed, but with a reduced percentage.

C) NOL deduction is fully allowed under AMT without any adjustments.

D) NOL deduction is only allowed for individuals, not for corporations.

Answer 1

The B) NOL deduction under AMT purposes is allowed but is limited to 90% of the AMTI before the exemption, which means it is reduced and cannot fully offset AMTI.

Step-by-step explanation:

Under the Alternative Minimum Tax (AMT) system, the treatment of a Net Operating Loss (NOL) deduction is different than under the regular tax system.

The correct answer to how the NOL deduction is treated under AMT purposes is B) NOL deduction is allowed, but with a reduced percentage.

For AMT purposes, the NOL deduction is limited to 90% of the Alternative Minimum Taxable Income (AMTI) before the exemption, as stipulated by the Internal Revenue Code.

This means you cannot fully offset your AMTI with an NOL as you might with regular taxable income.