Instructions For Form 4626 - 2005 (Page 7 of 12) in pdf

combined as follows to determine the

Corporation C subtracts its

Line

Amount

amount to enter on line 4b.

pre-adjustment AMTI from its ACE in

$250,000

each of the years and then multiplies

150,000

the result by 75% to get the following

Line 4a ACE

$25,000 $25,000 $25,000

112,500

potential ACE adjustments for 2001

-0-

through 2005.

Line 3 pre-adj.

112,500

AMTI

10,000

30,000 (50,000)

ACE minus

Potential

pre-adjustment

ACE

Amount to enter

Year

AMTI

adjustment

Line 6. Alternative Tax

on line 4b

$15,000 $(5,000) $75,000

2001

$(100,000)

$ (75,000)

Net Operating Loss

Example 2. Corporation B has line 4a

2002

300,000

225,000

Deduction (ATNOLD)

ACE of $(25,000). If Corporation B has

2003

(100,000)

(75,000)

line 3 pre-adjustment AMTI in the

2004

(400,000)

(300,000)

The ATNOLD is the sum of the

amounts shown below, its line 3 and

2005

150,000

112,500

alternative tax net operating loss

line 4a amounts would be combined as

(ATNOL) carrybacks and carryforwards

follows to determine the amount to

Under these facts, Corporation C

to the tax year, subject to the limitation

enter on line 4b.

has the following increases or

explained below. For a corporation that

reductions in AMTI for 2001 through

held a residual interest in a real estate

Line 4a ACE

$(25,000) $(25,000) $(25,000)

2005.

mortgage investment conduit (REMIC),

figure the ATNOLD without regard to

Increase or (reduction)

Line 3 pre-adj.

any excess inclusion.

in AMTI from ACE

AMTI

(10,000) (30,000)

50,000

Year

adjustment

NOLs arising in tax years

Amount to enter

beginning before August 6,

2001

on line 4b

$(15,000)

$5,000 $(75,000)

2002

225,000

1997, can be carried forward no

CAUTION

2003

(75,000)

more than 15 years. Therefore, the

Line 4d. A potential negative ACE

2004

(150,000)

corporation cannot carry forward an

adjustment (that is, a negative amount

2005

112,500

NOL to this tax year from a loss year

on line 4b multiplied by 75%) is allowed

beginning before 1990.

as a negative ACE adjustment on line

The ATNOL for a loss year is the

4e only if the corporation’s total

In 2001, Corporation C was not

increases in AMTI from prior year ACE

allowed to reduce its AMTI by any part

excess of the deductions allowed in

adjustments exceed its total reductions

of the potential negative ACE

figuring AMTI (excluding the ATNOLD)

over the income included in AMTI. This

in AMTI from prior year ACE

adjustment because it had no increases

excess is figured with the modifications

adjustments (line 4d). The purpose of

in AMTI from prior year ACE

line 4d is to provide a “running balance”

adjustments.

in section 172(d), taking into account

of this limitation amount. As such, the

the adjustments in sections 56 and 58

In 2002, Corporation C had to

and preferences in section 57 (that is,

corporation must keep adequate

increase its AMTI by the full amount of

the section 172(d) modifications must

records (for example, a copy of Form

its potential ACE adjustment. It was not

4626 completed at least through line 5)

be separately figured for the ATNOL).

allowed to use any part of its 2001

from year to year (even in years in

In applying the rules relating to the

unallowed potential negative ACE

which it does not owe any AMT).

determination of the amount of

adjustment of $75,000 to reduce its

carrybacks and carryforwards, use the

Any potential negative ACE

2002 positive ACE adjustment of

modification to those rules described in

adjustment that is not allowed as a

$225,000.

section 56(d)(1)(B)(ii).

negative ACE adjustment in a tax year

In 2003, Corporation C was allowed

because of the line 4d limitation cannot

The ATNOLD is generally limited to

to reduce its AMTI by the full amount of

be used to reduce a positive ACE

90% of AMTI determined without regard

its potential negative ACE adjustment

adjustment in any other tax year.

to the ATNOLD and any domestic

because that amount is less than its

Combine lines 4d and 4e of the 2004

production activities deduction under

line 4d limit of $225,000.

Form 4626 and enter the result on line

section 199. To figure AMTI without

4d of the 2005 form, but do not enter

In 2004, Corporation C was allowed

regard to the ATNOLD, use a second

less than zero.

to reduce its AMTI by only $150,000. Its

Form 4626 as a worksheet. Complete

potential negative ACE adjustment of

the second Form 4626 through line 5,

Example. Corporation C, a

$300,000 was limited to its 2002

but when figuring lines 2l and 2o, treat

calendar-year corporation, was

increase in AMTI of $225,000 minus its

line 6 as if it were zero. The amount

incorporated January 1, 2001. Its ACE

2003 reduction in AMTI of $75,000.

figured on line 5 of the second Form

and pre-adjustment AMTI for 2001

4626 is the corporation’s AMTI

through 2005 were as follows.

In 2005, Corporation C must

determined without regard to the

increase its AMTI by the full amount of

Pre-

ATNOLD. Add any domestic production

its potential ACE adjustment. It cannot

adjustment

activities deduction to this tentative

use any part of its 2004 unallowed

Year

ACE

AMTI

total. The ATNOLD limitation is 90% of

potential negative ACE adjustment of

this amount.

2001

$700,000

$800,000

$150,000 to reduce its 2005 positive

2002

900,000

600,000

ACE adjustment of $112,500.

However, if an ATNOL carried back

2003

400,000

500,000

Corporation C would complete the

to the tax year is attributable to

2004

(100,000)

300,000

relevant portion of its 2005 Form 4626

qualified Gulf Opportunity Zone losses

2005

250,000

100,000

as follows.

(as defined in section 1400N(k)(2))

-7-

Instructions For Form 4626 - 2005 Page 7

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