Question

Regulations apply to certain securities with regards to the Alternative Minimum Tax (AMT), and some are considered tax preference items, while other securities would not be subject to AMT. With regards to the following issues of municipal securities, which would NOT be subject to AMT?

Answer 1

Answer:

The correct answer is  General obligation bonds issued by a school district.

Explanation:

Alternative Minimum TAX (AMT) is the minimum amount at least taxpayers can pay. Its main purpose is to avoid having taxpayers not fulfilling their liability.

Economic instruments such as bonds issued for non-public purposes were items that could be used as preferential items when calculating Alternative Minimum Tax, but bonds issued for public reasons such as schools could not be preferential items. School bonds are free of taxes and AMT doesn't apply in this case.