Question

Which of these is not a preference item or adjustment for purposes of the individual alternative minimum tax?

a) the excess of percentage depletion over the property’s adjusted basis
b) investment interest in excess of net investment income
c) interest from a qualified private-activity municipal bond issued in 2007
d) excess intangible drilling costs

Answer 1

The interest from a qualified private-activity municipal bond issued in 2007 is not a preference item or adjustment for purposes of the individual alternative minimum tax. Therefore, the correct option is C

Step-by-step explanation:

The correct answer is c) interest from a qualified private-activity municipal bond issued in 2007.

Preference items and adjustments are added back to the taxpayer's regular taxable income to calculate the alternative minimum tax (AMT). Preference items are certain tax preferences that reduce the taxpayer's regular tax but are added back for AMT purposes. In contrast, adjustments modify specific deductions or exclusions that would otherwise reduce the taxpayer's regular taxable income.

The excess of percentage depletion over the property's adjusted basis, investment interest in excess of net investment income, and excess intangible drilling costs are all examples of preference items or adjustments for AMT purposes.