In 2017, Blake Incurs $270,000 of Mining Exploration Expenditures, and Deducts

question 69

Multiple Choice

In 2017, Blake incurs $270,000 of mining exploration expenditures, and deducts the entire amount for regular income tax purposes. Which of the following statements is correct?

• A) For AMT purposes, Blake will have a positive adjustment of $243,000 in 2017.
• B) Blake will have a negative AMT adjustment of $27,000 in 2021.
• C) Over a 10-year period, positive and negative adjustments for mining exploration expenditures will net to zero.
• D) Only a. and c. are correct.
• E) a., b., and c. are correct.

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Definitions:

Net Operating Income

This refers to a company's income after operating expenses are deducted, but before interest and taxes are subtracted.

Grinding Minutes

The amount of time spent on grinding operations in the manufacturing process, often used as a measure of labor or machine use.

Variable Manufacturing Overhead

Costs in manufacturing that vary with operational output, such as indirect materials, utilities, and other expenses that increase with production volume.

Fixed Manufacturing Overhead

Regular, consistent costs associated with operating a manufacturing facility that do not vary with the level of production, such as salaries and rent.