Cypress Corporation, a calendar year end corporation, has an AMT credit carryforward from 2018 (the credit arose in 2017) in the amount of $43,000. In 2019, Cypress has $170,000 of taxable income. What is the amount of refund Cypress can expect to receive from its 2019 tax return filing?

Answer: $3,650

Explanation:

Alternative Minimum Tax (AMT) can be used to lower the amount of taxes payable.

It is created when the tax payable is lower than AMT, it is carried forward and can reduce taxes Payable in future by the amount of the AMT credit.

The current AMT cycle of 2017 - 2022 allows for AMT credit to be refunded up to 50% of the excess of AMT credit over the normal tax liability with 100% being allowed in 2021.

The US corporate tax rate for 2019 is 21%.

Taxable Income = $170,000

Tax liability for 2019 = $170,000*21%

=$35,700

With a current tax liability of $35,700 being less than the AMT of $43,000, AMT will offset it.

Solving for yhe excess AMT Credit we have,

Excess AMT credit = AMT credit carryforward - Tax liability in 2019

= 43,000 - 35,700

= $7,300

The AMT Credit refunded can be calculated as,

AMT credit refunded = 50%*Excess AMT credit

= 50%*7,300

= $3,650

$3,650 is the amount of refund Cypress can expect to receive from its 2019 tax return filing.