SEE - Special Enrollment Exam Quiz: Alternative And Additional Taxes
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Alternative And Additional TaxesQuestion 1 of 15

Which of the following is correct regarding the 2025 alternative minimum tax exemption phase-out?

For a married taxpayer filing jointly, the $137,000 exemption is reduced by 25% of the amount by which alternative minimum taxable income exceeds $1,252,700 and is fully phased out when alternative minimum taxable income reaches $1,800,700.
For a single taxpayer, the $88,100 exemption is reduced by 25% of the amount by which alternative minimum taxable income exceeds $978,750, and no exemption remains once taxable income exceeds $1,252,700.
For a married taxpayer filing separately, the $68,500 exemption is reduced by 28% of the amount by which alternative minimum taxable income exceeds $626,350, and the reduction stops when the exemption reaches zero.
For a head-of-household taxpayer, the $88,100 exemption is reduced by 25% of the amount by which alternative minimum taxable income exceeds $239,100, the same threshold used for the 28% AMT rate.
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SEE - Special Enrollment Exam Quiz

SEE - Special Enrollment Exam Quiz: Alternative And Additional Taxes

Practice Alternative And Additional Taxes in SEE - Special Enrollment Exam with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

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Question 1

Which of the following is correct regarding the 2025 alternative minimum tax exemption phase-out?

  1. For a married taxpayer filing jointly, the $137,000 exemption is reduced by 25% of the amount by which alternative minimum taxable income exceeds $1,252,700 and is fully phased out when alternative minimum taxable income reaches $1,800,700. (correct answer)
  2. For a single taxpayer, the $88,100 exemption is reduced by 25% of the amount by which alternative minimum taxable income exceeds $978,750, and no exemption remains once taxable income exceeds $1,252,700.
  3. For a married taxpayer filing separately, the $68,500 exemption is reduced by 28% of the amount by which alternative minimum taxable income exceeds $626,350, and the reduction stops when the exemption reaches zero.
  4. For a head-of-household taxpayer, the $88,100 exemption is reduced by 25% of the amount by which alternative minimum taxable income exceeds $239,100, the same threshold used for the 28% AMT rate.
Explanation: IRC § 55(d) provides the AMT exemption amounts and phases them out by 25% of the amount by which alternative minimum taxable income (AMTI) exceeds the applicable threshold. For 2025, the MFJ exemption is $137,000, the phase-out threshold is $1,252,700, and complete phase-out occurs at $1,800,700, so Choice A is correct. Choice B misstates the single taxpayer's phase-out threshold: $978,750 is the point of complete phase-out, not the start of the phase-out, and the single threshold is 626,350.ChoiceCuses28626,350. Choice C uses 28% instead of the correct 25% reduction rate. Choice D uses the 28% bracket threshold (239,100) as the head-of-household phase-out threshold; the head-of-household phase-out threshold is $626,350.

Question 2

A married couple will file a joint return for 2025. One spouse had wages of $240,000 from a single employer, and the other spouse had wages of $130,000 from a single employer. The first spouse's employer withheld Additional Medicare Tax on that spouse's wages as required by law; the second spouse's employer withheld no Additional Medicare Tax. The couple has no other income. What amount of Additional Medicare Tax will the couple owe with their 2025 return after the credit for withholding?

  1. $360
  2. $720 (correct answer)
  3. $1,080
  4. $1,530
Explanation: IRC § 3101(b)(2) and the Form 8959 instructions. For a joint return, the 0.9% Additional Medicare Tax applies to combined Medicare wages in excess of the $250,000 threshold. The couple's combined wages are $370,000, so the excess is $120,000 and the total tax is 0.9% × $120,000 = $1,080. An employer must withhold the 0.9% tax on wages over 200,000paidtothatemployeewithoutregardtotheemployee′sfilingstatus,sothefirstspouse′semployerwithheld0.9200,000 paid to that employee without regard to the employee's filing status, so the first spouse's employer withheld 0.9% × (240,000 - $200,000) = $360, and the second spouse's employer withheld nothing. After the credit for withholding, the balance due with the return is $1,080 - $360 = $720. Choice B is correct. Choice A ($360) is the amount the first spouse's employer was required to withhold; it treats the employer's 200,000withholdingthresholdasthemeasureofthecouple′staxliability.ChoiceC(200,000 withholding threshold as the measure of the couple's tax liability. Choice C (1,080) is the total tax before subtracting the withholding credit. Choice D ($1,530) applies the $200,000 single-filer threshold to the couple's combined wages (0.9% of $170,000) instead of the $250,000 joint-return threshold.

Question 3

A married couple filing jointly has 2025 wage income of $260,000 for one spouse and $60,000 for the other spouse. The higher-paid spouse's employer withheld $540 of Additional Medicare Tax; the other spouse's employer withheld none. They have no self-employment income or other income.

What additional amount of Additional Medicare Tax, if any, do they owe with their 2025 return?

  1. $0
  2. $630
  3. $540
  4. $90 (correct answer)
Explanation: Under IRC §3101(b)(2), Additional Medicare Tax is 0.9% of the excess of combined wages over the applicable threshold. For married filing jointly in 2025, the threshold is $250,000. The couple's combined wages are $320,000, so the tax is 0.9% of $70,000, or $630. The $540 withheld by the higher-paid spouse's employer is credited, leaving $90 due. Choice D is correct. Choice B ignores the withholding; Choice C treats the withholding as the tax; Choice A applies a separate $200,000 threshold to each spouse.

Question 4

A taxpayer has a minimum tax credit carryforward of $30,000 from prior years, all attributable to deferral preferences. For 2025, her regular tax liability before credits is $80,000, and her tentative minimum tax on Form 6251 is $56,000. She owes no AMT for 2025 and has no other credits.

What amount of minimum tax credit may she claim on her 2025 return?

  1. $0
  2. $30,000
  3. $24,000 (correct answer)
  4. $6,000
Explanation: Under IRC §53, the minimum tax credit may offset regular tax liability but may not reduce regular tax below tentative minimum tax. Her 2025 limit is $80,000 − $56,000 = $24,000. The remaining $6,000 of the $30,000 carryforward carries to 2026. Choice C is correct. Choice B ignores the tentative-minimum-tax limitation; Choice A assumes the credit is available only in a year when AMT is owed; Choice D is the carryover amount, not the current-year credit.

Question 5

For 2025, a single taxpayer has $210,000 of wages. Her employer withheld $90 of Additional Medicare Tax on wages over $200,000. She also has net earnings from self-employment of $25,000. She has no other income.

How much Additional Medicare Tax, if any, remains due with her 2025 return?

  1. $315
  2. $225 (correct answer)
  3. $90
  4. $0
Explanation: Under IRC §§ 3101(b)(2) and 1401(b)(2), Additional Medicare Tax applies to wages and self-employment income to the extent they exceed the applicable threshold. For a single taxpayer in 2025, the threshold is $200,000. Her combined wages and net earnings from self-employment are $235,000, so the tax is 0.9% of $35,000, or $315. The $90 withheld by her employer is credited against that liability, leaving $225 due. Choice B is correct. Choice A is the gross Additional Medicare Tax before crediting the $90 withholding; Choice C treats the amount withheld as the amount owed; Choice D results from applying the $250,000 threshold instead of the $200,000 single threshold.

Question 6

A single taxpayer has 2025 wages of $185,000. She also received $12,000 of taxable interest and realized a $25,000 long-term capital gain from selling stock. She sold her principal residence for $620,000; her adjusted basis was $300,000, and she qualifies to exclude $250,000 of the gain under IRC §121. Her MAGI for NIIT purposes equals her AGI, and she has no other income.

What is her net investment income tax for 2025?

  1. $3,496 (correct answer)
  2. $4,066
  3. $1,406
  4. $3,610
Explanation: Under IRC §1411, the net investment income tax is 3.8% of the lesser of net investment income (NII) or the excess of modified adjusted gross income (MAGI) over the applicable threshold. For a single taxpayer in 2025, the threshold is $200,000. Her recognized gain on the home sale is 70,000(70,000 (620,000 - $300,000 - $250,000 §121 exclusion), so her AGI/MAGI is 292,000(292,000 (185,000 wages + $12,000 interest + $25,000 stock gain + $70,000 home gain). Her NII is 107,000(107,000 (12,000 interest + $25,000 stock gain + $70,000 home gain). The MAGI excess is $92,000, which is less than NII, so the tax is 3.8% x $92,000 = $3,496. Choice A is correct. Choice B applies 3.8% to the entire $107,000 of NII and ignores the MAGI cap. Choice C omits the $70,000 recognized home gain from NII but keeps it in AGI, leaving $37,000 NII; because $37,000 is less than the $92,000 MAGI excess, the tax is 3.8% x $37,000 = $1,406. Choice D omits the $12,000 taxable interest and applies 3.8% to the remaining $95,000 of NII without applying the lesser-of limitation, yielding $3,610.

Question 7

In July 2025, a single taxpayer exercised an incentive stock option, paying $10,000 for stock with a fair market value of $25,000 on the exercise date. He did not sell the stock in 2025, and no disqualifying disposition occurred.

For 2025, which of the following is correct regarding this option exercise?

  1. He must include the $15,000 spread as wages on his 2025 Form W-2, and his regular and AMT basis in the shares is $25,000.
  2. He must add the $15,000 spread as an AMT adjustment in computing alternative minimum taxable income for 2025, and his AMT basis in the shares is $25,000. (correct answer)
  3. He reports no income or adjustment in 2025 and holds the shares with a $10,000 basis for both regular tax and AMT until he sells them.
  4. He may elect to include the $15,000 spread in regular income for 2025, which gives him a $25,000 basis for both regular tax and AMT.
Explanation: Under IRC §56(b)(3), the incentive stock option rules of §421 do not apply for AMT purposes. The $15,000 excess of fair market value over exercise price is therefore an AMT adjustment for 2025 even though it is not included in regular taxable income, and his AMT basis in the stock becomes $25,000. Choice B is correct. Choice A wrongly treats the spread as regular wages; Choice C ignores the AMT adjustment; Choice D describes an election that does not apply to an ISO exercise.

Question 8

For 2025, a single taxpayer has regular taxable income of $120,000 after itemized deductions. His itemized deductions consisted of $14,000 of state income tax, $6,000 of real property tax, $9,000 of qualified housing interest, and $5,000 of charitable contributions. He also received $8,000 of interest from a specified private activity bond, which is not included in regular taxable income. He has no other AMT adjustments or preferences.

What is his alternative minimum taxable income (AMTI) for 2025?

  1. $140,000
  2. $120,000
  3. $148,000 (correct answer)
  4. $142,000
Explanation: Under IRC § 56(b)(1)(A) and § 57(a)(5), state and local income and property taxes are disregarded in computing AMTI, and tax-exempt interest on specified private activity bonds is a tax preference. The $14,000 state income tax, $6,000 real property tax, and $8,000 bond interest are added to regular taxable income; qualified housing interest and charitable contributions are allowed. AMTI is $120,000 + $14,000 + $6,000 + $8,000 = $148,000. Choice C is correct. Choice B ignores all add-backs. Choice A adds the two tax items but omits the private-activity-bond preference. Choice D omits the real property tax add-back.

Question 9

A married couple will file a joint return for 2025. The couple has alternative minimum taxable income of $1,500,000. What is the amount of the couple's AMT exemption after application of the phase-out?

  1. $26,275
  2. $61,825
  3. $75,175 (correct answer)
  4. $137,000
Explanation: IRC § 55(d). For 2025, the AMT exemption for a married couple filing jointly is $137,000. The exemption is reduced by 25% of the amount by which alternative minimum taxable income exceeds the 1,252,700phase−outthresholdforjointfilers.Thereductionis251,252,700 phase-out threshold for joint filers. The reduction is 25% × (1,500,000 - $1,252,700) = 25% × $247,300 = $61,825, so the exemption after the phase-out is $137,000 - $61,825 = $75,175. Choice C is correct. Choice A ($26,275) uses the $88,100 exemption for single filers and subtracts the same $61,825 phase-out; the exemption for a joint return is 137,000.ChoiceB(137,000. Choice B (61,825) is the phase-out reduction itself, not the exemption that remains after the reduction. Choice D ($137,000) is the exemption before any phase-out; it ignores the phase-out even though AMTI of $1,500,000 exceeds the $1,252,700 threshold.

Question 10

A single taxpayer, age 41, has no adjustments to income and claims the standard deduction. For 2025, the taxpayer has wages of $230,000, taxable interest of $6,000, qualified dividends of $4,000, a long-term capital gain of $10,000, a taxable distribution of $8,000 from a traditional IRA that was not rolled over, and $3,000 of interest from municipal bonds. The taxpayer has no expenses allocable to investment income. What is the amount of the taxpayer's net investment income tax for 2025?

  1. $760 (correct answer)
  2. $874
  3. $1,064
  4. $2,204
Explanation: IRC § 1411; Form 8960 instructions. The net investment income tax is 3.8% of the lesser of net investment income (NII) and the excess of modified adjusted gross income (MAGI) over the threshold amount ($200,000 for a single taxpayer). The taxpayer's MAGI is $258,000 (wages $230,000 + taxable interest $6,000 + qualified dividends $4,000 + long-term capital gain $10,000 + taxable IRA distribution $8,000); the $3,000 municipal bond interest is tax-exempt and is not included in gross income. The excess over the threshold is $58,000. NII is $20,000 (interest $6,000 + dividends $4,000 + capital gain $10,000). Wages, the IRA distribution, and the tax-exempt interest are not NII. Because NII is the smaller amount, the tax is 3.8% × $20,000 = $760. Choice A is correct. Choice B ($874) treats the $3,000 of tax-exempt municipal interest as NII and applies 3.8% to 23,000;tax−exemptinterestisnotNII.ChoiceC(23,000; tax-exempt interest is not NII. Choice C (1,064) treats the $8,000 IRA distribution as NII and applies 3.8% to 28,000;retirementplandistributionsarenotNII.ChoiceD(28,000; retirement plan distributions are not NII. Choice D (2,204) applies 3.8% to the full $58,000 MAGI excess, ignoring the rule that the tax is limited to net investment income.

Question 11

Which of the following is correct regarding the 2025 Additional Medicare Tax?

  1. A married taxpayer filing separately is subject to the Additional Medicare Tax on wages and self-employment income in excess of $200,000, with no reduction for the spouse's threshold.
  2. The Additional Medicare Tax is imposed on employees and employers, with each paying 0.45% of wages in excess of the applicable threshold, and employers report their share on Form 8959.
  3. An employer must withhold Additional Medicare Tax from wages paid to an employee in excess of $200,000 in a calendar year, without regard to the employee's filing status or wages paid by another employer. (correct answer)
  4. A taxpayer with both wages and self-employment income applies the threshold first to self-employment income and any remaining threshold is then applied to wages in computing the Additional Medicare Tax.
Explanation: IRC § 3101(b)(2) imposes the 0.9% Additional Medicare Tax on wages above the taxpayer's threshold, and IRC § 3102 requires an employer to withhold it once wages paid by that employer exceed $200,000, without regard to filing status or other employment. Choice C is correct. Choice A misstates the married-filing-separately threshold, which is $125,000, not $200,000. Choice B misstates the incidence of the tax: it is imposed on employees, not employers, and there is no employer match. Choice D reverses the statutory allocation; in computing the tax on self-employment income, the threshold is reduced by the taxpayer's wages, not by amounts first allocated to self-employment income.

Question 12

Which of the following is correct regarding the computation of alternative minimum taxable income for 2025?

  1. State and local income taxes are deductible in computing alternative minimum taxable income to the same extent they are deductible on Schedule A, because the AMT uses the regular rules for these taxes.
  2. Interest on specified private activity bonds issued after August 7, 1986, other than qualified 501(c)(3) bonds, is a tax preference item even though the interest is excluded from regular taxable income. (correct answer)
  3. Cash charitable contributions are not deductible for AMT; they must be added back to regular taxable income even though they are allowed as itemized deductions for regular tax purposes.
  4. The standard deduction is allowed in computing alternative minimum taxable income, while the AMT exemption is a separate amount that is not added back to income.
Explanation: IRC § 57(a)(5) treats interest on specified private activity bonds, other than qualified 501(c)(3) bonds, as a tax preference even though the interest is otherwise tax-exempt, so Choice B is correct. Choice A misstates the treatment of state and local income taxes: they are not deductible for AMT and are added back to regular taxable income. Choice C misstates charitable contributions: cash charitable contributions are generally allowed for AMT, subject to the regular percentage limits, and are not added back. Choice D misstates the standard deduction: the standard deduction is not allowed in computing AMTI and is added back when AMTI is computed from taxable income.

Question 13

Which of the following is correct regarding the 2025 net investment income tax?

  1. A single taxpayer with modified adjusted gross income of $240,000 and net investment income of $30,000 owes net investment income tax of $1,520.
  2. A married taxpayer filing jointly with modified adjusted gross income of $260,000 and net investment income of $40,000 owes net investment income tax of $1,520.
  3. A married taxpayer filing separately with modified adjusted gross income of $190,000 and net investment income of $25,000 owes net investment income tax of $2,470.
  4. A single taxpayer with modified adjusted gross income of $180,000 and net investment income of $40,000 owes no net investment income tax because modified adjusted gross income is below the applicable threshold. (correct answer)
Explanation: IRC § 1411 imposes the net investment income tax at 3.8% of the lesser of net investment income and the excess of modified adjusted gross income over the applicable threshold. For 2025, the threshold for a single taxpayer is $200,000. Choice D is therefore correct: at $180,000 of MAGI, no threshold excess exists. Choice A computes the tax on the $40,000 excess MAGI instead of the lesser $30,000 net investment income; the correct tax is $1,140. Choice B misstates the MFJ calculation: the excess over the $250,000 threshold is $10,000, so the correct tax is $380. Choice C makes the same excess-MAGI error for MFS: the MFS threshold is $125,000, so the correct tax is 3.8% of the $25,000 net investment income, or $950.

Question 14

Which of the following is correct regarding the 2025 kiddie tax on the unearned income of a child who is subject to it?

  1. A child with $3,000 of interest income and no earned income has taxable income of $1,650, all of which is taxed at the parent's marginal rate and reported on Form 8615.
  2. A child with $3,000 of interest income and no earned income has taxable income of $1,650, of which $300 is taxed at the parent's marginal rate on Form 8615 and $1,350 is taxed at the child's rates. (correct answer)
  3. If a child's unearned income is $2,700 or less, the child owes no income tax because the first $2,700 of a child's unearned income is exempt from tax.
  4. A child's unearned income is taxed entirely at the parent's marginal rate once unearned income exceeds $1,350, so Form 8615 is required at that same threshold.
Explanation: IRC § 1(g), as amended by the SECURE Act (Further Consolidated Appropriations Act, 2020), governs the tax on a child's unearned income. For 2025, the child's net unearned income is taxed at the parent's marginal rate (the allocable parental tax computed on Form 8615), and the rest of the child's taxable income is taxed at the child's own rates. The trust and estate rate schedule applied to net unearned income only for 2018 and 2019. A dependent child with no earned income receives a $1,350 standard deduction under IRC § 63(c)(5), the next $1,350 of unearned income is taxed at the child's rates, and unearned income above $2,700 is net unearned income taxed at the parent's rate. For $3,000 of interest income, taxable income is $1,650; net unearned income is $300, and the remaining $1,350 is taxed at the child's rates. Choice B is correct. Choice A misstates the allocation: the parent's rate applies only to the $300 of net unearned income, not to the entire $1,650. Choice C ignores the tax on unearned income above the $1,350 standard deduction; for example, $2,700 of unearned income produces $1,350 of taxable income taxed at the child's rates. Choice D misstates the threshold: the parent's rate applies only to net unearned income above $2,700, and Form 8615 is generally required when unearned income exceeds $2,700 (unless the parent elects to report the income on Form 8814).

Question 15

A married couple filing jointly has alternative minimum taxable income (AMTI) of $1,500,000 for 2025 before any AMT exemption, all from ordinary income. Their regular tax liability is $360,000, and they have no credits that affect the AMT computation.

What is the amount of alternative minimum tax, if any, they must pay for 2025?

  1. $34,169 (correct answer)
  2. $16,858
  3. $10,455
  4. $55,218
Explanation: IRC § 55(b) and (d). For 2025 the MFJ AMT exemption is $137,000, reduced by 25% of AMTI over $1,252,700. The excess is $1,500,000 − $1,252,700 = $247,300, and 25% of $247,300 is $61,825, so the exemption is $137,000 − $61,825 = $75,175. The AMT base is $1,500,000 − $75,175 = $1,424,825. The tentative minimum tax is 26% of the first $239,100 plus 28% of the rest: 26% × $239,100 = $62,166; $1,424,825 − $239,100 = $1,185,725; 28% × $1,185,725 = $332,003; and $62,166 + $332,003 = $394,169. The AMT is the excess of tentative minimum tax over regular tax: $394,169 − $360,000 = 34,169.ChoiceAiscorrect.ChoiceB(34,169. Choice A is correct. Choice B (16,858) is wrong because it uses the full 137,000exemptionandignoresthephase−out.ChoiceC(137,000 exemption and ignores the phase-out. Choice C (10,455) is wrong because it applies a flat 26% rate to the entire AMT base instead of 28% above 239,100.ChoiceD(239,100. Choice D (55,218) is wrong because it disallows the exemption entirely; at $1,500,000 of AMTI the exemption is only partly phased out.