The Net Capital Gain Included in an Individual Taxpayer's AMT

question 18

True/False

The net capital gain included in an individual taxpayer's AMT base is eligible for the alternative tax rate on net capital gain. This favorable alternative rate applies both in calculating the regular income tax and the AMT.

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Definitions:

Capital Lease

A lease classified as a purchase by the lessee, where the asset is accounted for on the lessee’s balance sheet as an asset.

Effective-Interest Method

A method of calculating the amortized cost of a bond and the interest expense over the life of the bond by applying a constant interest rate to the carrying value of the bond.

GAAP

Stands for Generally Accepted Accounting Principles, which are the standard framework of guidelines for financial accounting in a particular jurisdiction.

Straight-Line Method

A method of depreciation where an asset's cost is evenly reduced over its useful life.