Instructions For Form 6251 - Alternative Minimum Tax-Individuals

(determined without regard to any lapse

Treat the difference as a negative

in a $53,000 negative adjustment to

restriction) over the exercise price upon

amount if (a) both the AMT and regular

include on line 16.

the transfer to you of the stock acquired

tax amounts are zero or more and the

Ash has an AMT capital loss

through exercise of the option. You

AMT amount is less than the regular

carryover from 2003 to 2004 of

must make the election by the 30th day

tax amount or (b) the AMT amount is a

$62,000, of which $22,000 is short-term

after the date of the transfer. See Pub.

loss, and the regular tax amount is a

and $40,000 is long-term. If he has no

525, Taxable and Nontaxable Income,

smaller loss or zero or more.

other Schedule D transactions for 2004,

for more details.

his adjustment reported on line 16 of

Enter on line 16 the combined

his 2004 Form 6251 would be limited to

If you acquired stock by exercising

adjustments for the 4 items above.

($3,000), the amount of his capital loss

an ISO and you disposed of that stock

limitation for 2004.

Example. On March 13, 2002,

in the same year, the tax treatment

Victor Ash, whose filing status is single,

under the regular tax and the AMT is

Line 17—Post-1986

paid $20,000 to exercise an incentive

the same, and no adjustment is

Depreciation

stock option (which was granted to him

required.

on January 2, 2001) to buy 200 shares

This section describes when

Increase your AMT basis in any

of stock worth $200,000. The $180,000

depreciation must be refigured for the

stock acquired through the exercise of

difference between his cost and the

AMT and how to figure the amount to

an ISO by the amount of the

value of the stock at the time he

enter on line 17.

adjustment. Keep adequate records for

exercised the option is not taxable for

both the AMT and regular tax so that

Do not use line 17 for depreciation

the regular tax. His regular tax basis in

you may figure your adjustment. See

related to the following.

the stock at the end of 2002 is $20,000.

•

the instructions for line 16.

Employee business expenses

For the AMT, however, Ash must

claimed on line 20 of Schedule A (Form

include the $180,000 as an adjustment

Line 15—Large Partnerships

1040). Take this adjustment into

on his 2002 Form 6251. His AMT basis

If you were a partner in an electing

account on line 5.

in the stock at the end of 2002 is

•

large partnership, enter the amount

Passive activities. Take this

$200,000.

from Schedule K-1 (Form 1065-B), box

adjustment into account on line 18.

•

On January 20, 2003, Ash sold 100

6. Take into account any amount from

An activity for which you are not at

of the shares for $75,000. Because Ash

box 5 on Form 6251, line 18.

risk or income or loss from a

did not hold these shares more than 1

partnership or an S corporation if the

Line 16—Disposition of

year, that sale is a disqualifying

basis limitations apply. Take this

disposition. For the regular tax, Ash has

Property

adjustment into account on line 19.

•

ordinary income of $65,000 (proceeds

A tax shelter farm activity. Take this

Use this line to report any AMT

minus his $10,000 basis in the 100

adjustment into account on line 26.

adjustment related to the disposition of

shares). Ash has no capital gain or loss

property resulting from refiguring:

What Depreciation Must Be

for the regular tax resulting from the

1. Gain or loss from the sale,

Refigured for the AMT?

sale. For the AMT, Ash has no ordinary

exchange, or involuntary conversion of

income, but has a short-term capital

Generally, you must refigure

property reported on Form 4797, Sales

loss of $25,000 (proceeds minus his

depreciation for the AMT, including

of Business Property;

$100,000 AMT basis in the 100

depreciation allocable to inventory

2. Casualty gain or loss to business

shares).

costs, for:

•

or income-producing property reported

Property placed in service after 1998

On April 21, 2003, Ash sold the other

on Form 4684, Casualties and Thefts;

that is depreciated for the regular tax

100 shares for $60,000. Because he

3. Ordinary income from the

using the 200% declining balance

held the shares for more than 1 year,

disposition of property not already

method (generally 3-, 5-, 7-, and

the sale is not a disqualifying

taken into account in 1 or 2 above or on

10-year property under the modified

disposition. For the regular tax, Ash has

any other line on Form 6251, such as a

accelerated cost recovery system

a long-term capital gain of $50,000

disqualifying disposition of stock

(MACRS), except for qualified property

(proceeds minus his regular tax basis of

acquired in a prior year by exercising

eligible for the special depreciation

$10,000). For the AMT, Ash has a

an incentive stock option; and

allowance (see page 4));

long-term capital loss of $40,000

•

4. Capital gain or loss (including any

Section 1250 property placed in

(proceeds minus his AMT basis of

carryover that is different for the AMT)

service after 1998 that is not

$100,000).

reported on Schedule D (Form 1040),

depreciated for the regular tax using

Capital Gains and Losses.

the straight line method; and

Ash has no other sales of stock or

•

Tangible property placed in service

other capital assets for 2003. Ash

The $3,000 capital loss

after 1986 and before 1999 (if the

enters a total negative adjustment of

limitation for the regular tax

transitional election was made under

$118,000 on line 16 of his 2003 Form

applies separately for the AMT.

CAUTION

section 203(a)(1)(B) of the Tax Reform

6251, figured as follows:

•

See the instructions and example

Act of 1986, this rule applies to property

Ash figures a negative adjustment of

below.

placed in service after July 31, 1986).

$65,000 for the difference between the

First figure any ordinary income

$65,000 of regular tax ordinary income

What Depreciation Is Not

adjustment related to 3 above. Then,

and the $0 of AMT ordinary income for

Refigured for the AMT?

refigure Form 4684, Form 4797, and

the first sale.

•

Schedule D for the AMT, if applicable,

For the regular tax, Ash has $50,000

Do not refigure depreciation for the

by taking into account any adjustments

capital gain net income reported on

AMT for the following.

•

you made this year or in previous years

Schedule D for the second sale. For the

Residential rental property placed in

that affect your basis or otherwise result

AMT, Ash has a $25,000 short-term

service after 1998.

•

in a different amount for the AMT. If you

capital loss from the first sale, and a

Nonresidential real property with a

have a capital loss after refiguring

$40,000 long-term capital loss from the

class life of 27.5 years or more placed

Schedule D for the AMT, apply the

second sale, resulting in a net capital

in service after 1998 that is depreciated

$3,000 capital loss limitation separately

loss of $65,000 for the AMT. However,

for the regular tax using the straight line

to the AMT loss. For each of the four

only $3,000 of the $65,000 net capital

method.

•

items listed above, figure the difference

loss is allowed for 2003 for the AMT.

Other section 1250 property placed

between the amount included in taxable

The difference between the regular tax

in service after 1998 that is depreciated

income for the regular tax and the

Schedule D gain of $50,000 and the

for the regular tax using the straight line

amount included in income for the AMT.

$3,000 loss allowed for the AMT results

method.

-3-

Instructions For Form 6251 - Alternative Minimum Tax-Individuals - 2003 Page 3

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