The alternative minimum tax system differs from the regular tax system in that it aims to ensure taxpayers pay a minimum percentage of tax based on accounting income through adjustments and preferences not allowed in the regular system. Congress implemented the alternative minimum tax to guarantee tax revenue for the government. It is calculated based on regular taxable income but includes adjustments like accelerated depreciation and disallows preferences like certain tax-exempt interest.

1. · How does the alternative minimum tax system differ from the regular tax system? How is it
similar? Why did Congress implement the alternative minimum tax system? The starting point
for computing alternative minimum taxable income is regular taxable income. What are some
adjustments and preferences to regular taxable income to compute alternative minimum taxable
income ( identify two adjustments/two preferences )?
Solution
Though both alternative taxes and normal taxes are paid by citizens, both are different with each
other. Alternative minimum tax is payable when the tax payable on the taxable income is less
than the percentage specified percentage of accounting income specified by federal.
Alternative minimum tax is imposed on the tax payers with the sole intention to provide the
government, guaranteed tax revenue.
No, starting point of alternative minimum tax is positive accounting income. Whenever there is
positive accounting income, tax payer must pay either normal tax or minimum alternative tax.
Two adjustments:
2. Accelerated depreciation.