Instructions For Form 4626 - 2005 (Page 5 of 12) in pdf

must be suspended and carried forward

Enter on line 2l the difference

Line 2j. Passive Activities

indefinitely until the corporation has a

between the regular tax and the AMT

gain in a subsequent year from that

deduction. If the AMT deduction is

This adjustment applies only to

same activity or it disposes of the

more than the regular tax deduction,

closely held corporations and

activity.

enter the difference as a negative

personal service corporations.

CAUTION

amount.

Refigure all passive activity gains

Line 2k. Loss Limitations

Line 2m. Tax-Exempt Interest

and losses reported for the regular tax

Refigure gains and losses reported for

by taking into account the corporation’s

Income From Specified

the regular tax from at-risk activities

AMT adjustments and preferences and

Private Activity Bonds

and the corporation’s share of

AMT prior year unallowed losses that

distributive items from partnerships by

Enter on line 2m interest income from

apply to that activity.

taking into account the corporation’s

specified private activity bonds,

Determine the corporation’s AMT

AMT adjustments and preferences. If

reduced by any deduction that would

passive activity gain or loss using the

the corporation has recomputed losses

have been allowable if the interest were

same rules used for the regular tax.

that must be limited for the AMT by

includible in gross income for the

Generally, no loss is allowed. However,

section 465 or section 704(d) or the

regular tax. Generally, a specified

if the corporation is insolvent, losses

corporation reported losses for the

private activity bond is any private

are allowed to the extent the

regular tax from at-risk activities or

activity bond (as defined in section 141)

corporation is insolvent (see section

distributive shares of partnership losses

issued after August 7, 1986, on which

58(c)).

that were limited by those sections,

the interest is not includible in gross

figure the difference between the loss

Disallowed losses of a personal

income for the regular tax. See section

limited for the AMT and the loss limited

service corporation are suspended until

57(a)(5) for exceptions and details. Do

for the regular tax for each applicable

the corporation has income from that

not include interest on qualified Gulf

at-risk activity or distributive share of

(or any other) passive activity or until

Opportunity Zone bonds (described in

partnership loss. “Loss limited” means

the passive activity is disposed of (that

section 1400N(a)) issued after

the amount of loss that is not allowable

is, its passive losses cannot offset “net

December 21, 2005.

for the year because of the limitations

active income” (defined in section

Line 2n. Intangible Drilling

above.

469(e)(2)(B) or “portfolio income”)).

Disallowed losses of a closely held

Costs

Enter on line 2k the excess of the

corporation that is not a personal

loss limited for the AMT over the loss

service corporation are treated the

Do not make this adjustment for

limited for the regular tax. If the loss

same except that, in addition, they may

costs for which the corporation

limited for the regular tax is more than

be used to offset “net active income.”

elected the optional 60-month

the loss limited for the AMT, enter the

CAUTION

write-off for the regular tax.

difference as a negative amount.

Keep adequate records for

losses that are not deductible

TIP

Intangible drilling costs (IDCs) from

Line 2l. Depletion

(and therefore carried forward)

oil, gas, and geothermal properties are

for both the AMT and regular tax.

Refigure depletion using only income

a preference to the extent excess IDCs

and deductions allowed for the AMT

exceed 65% of the net income from the

Enter on line 2j the difference

when refiguring the limit based on

properties. Figure the preference for all

between the AMT gain or loss and the

taxable income from the property under

geothermal deposits separately from

regular tax gain or loss. Enter the

section 613(a) and the limit based on

the preference for all oil and gas

difference as a negative amount if the

taxable income, with certain

properties that are not geothermal

corporation had:

•

adjustments, under section 613A(d)(1).

deposits.

An AMT loss and a regular tax gain,

•

Also, the depletion deduction for mines,

An AMT loss that exceeds the

Excess IDCs. Excess IDCs are the

wells, and other natural deposits is

regular tax loss, or

excess of:

•

limited to the property’s adjusted basis

The amount of IDCs the corporation

A regular tax gain that exceeds the

at the end of the year, as refigured for

paid or incurred for oil, gas, or

AMT gain.

the AMT, unless the corporation is an

geothermal properties that it elected to

Tax Shelter Farm Activities That

independent producer or royalty owner

expense for the regular tax (not

Are Passive Activities

claiming percentage depletion for oil

including any IDCs paid or incurred for

and gas wells. Figure this limit

Refigure all gains and losses reported

nonproductive wells) reduced by the

separately for each property. When

for the regular tax by taking into

section 291(b)(1) adjustment for

refiguring the property’s adjusted basis,

account the corporation’s AMT

integrated oil companies and increased

take into account any AMT adjustments

adjustments and preferences and AMT

by any IDCs allowed to be amortized

the corporation made this year or in

prior year unallowed losses.

under section 291(b)(2) over

•

previous years that affect basis (other

The amount that would have been

Use the same rules as outlined

than the current year’s depletion). Do

allowed if the corporation had

above for other passive activities, with

not include in the property’s adjusted

amortized that amount over a

the following modifications.

basis any unrecovered costs of

•

120-month period starting with the

AMT gains from tax shelter farm

depreciable tangible property used to

month the well was placed in

activities that are passive activities may

exploit the deposits (for example,

production or, alternatively, had elected

be used to offset AMT losses from

machinery, tools, pipes, etc.).

any method that is permissible in

other passive activities.

•

determining cost depletion.

AMT losses from tax shelter farm

For iron ore and coal (including

activities that are passive activities may

lignite), apply the section 291

Net income from oil, gas, and

not be used to offset AMT gains from

adjustment before figuring this

geothermal properties. Net income is

other passive activities. These losses

preference.

the gross income the corporation

-5-

Instructions For Form 4626 - 2005 Page 5

Related Articles

Related forms

Related Categories