Choice "A" is correct. Tan's tax liability is calculated as follows:
| |
|---|
| Tan's regular tax liability | $ 210,000 |
| Plus: Tan's AMT ($240,000 − 210,000)* | 30,000 |
| Plus: Tan's PHC tax** | 65,000 |
| Tan's tax liability | $ 305,000 |
*Tan will pay alternative minimum tax (AMT) to the extent that AMT exceeds regular tax. **Tan will pay personal holding company tax in addition to its regular and alternative minimum taxes.Choices "d", "b", and "c" are incorrect, per the above explanation.
