How do you know when am is a preposition?

 "am" is never a "preposition".  Rather, "am" is a "first-person, present tense, singular" conjugated form of the verb, "to be" (in English); that takes the subject pronoun, "I".  
 
              "am" is a "verb"— and never a preposition.

Allusion and illusion. an allusion is an indirect reference, whereas an illusion is something that is unreal or incorrect. each of the nouns has a related verb form: allude “to refer indirectly to,” and illude (not a very common word), which may mean “to delude or deceive” or “to subject to an illusion.”

The answer is holding on to the past