Taxation

Pheasant, Inc., is going to be subject to the AMT in 2010. The corporation owns an investment building and is considering disposing of it and investing in other realty. Based on an appraisal of the building’s value, the realized gain would be $85,000. Ed has offered to purchase the building from Pheasant with the closing date being December 29, 2010. Ed wants to close the transaction in 2010 because certain beneficial tax consequences will result only if the transaction is closed prior to the beginning of 2011. Abby has offered to purchase the building with the closing date being January 2, 2011. The building has a $95,000 greater AMT adjusted basis. For regular income tax purposes, Pheasant expects to be in the 34% tax bracket.

What are the relevant tax issues that Pheasant faces in making its decision?

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Josepi’s construction company uses the completed contract method. During the three-year period 2010–2012, Josepi recognized the following income on his two construction contracts. If Josepi had used the percentage of completion method, he would have recognized the following income.

Calculate the AMT adjustment for 2010, 2011, and 2012.

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