Instructions For Form 4626 - 2010 Page 6
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11amount of installment sale income
group filing a consolidated return under
Pre-
adjustment
reported for the regular tax.
the rules of section 1501, figure line 4b
Year
ACE
AMTI
on a consolidated basis.
Accelerated depreciation of real
property and certain leased personal
2006
$700,000
$800,000
Line 4b. The following examples
property (pre-1987).
2007
900,000
600,000
illustrate the manner in which line 3 is
2008
400,000
500,000
subtracted from line 4a to get the
This preference generally
2009
(100,000)
300,000
amount to enter on line 4b.
!
applies only to property placed
2010
250,000
100,000
in service after 1987, but
CAUTION
Example 1. Corporation A has line 4a
depreciated using pre-1987 rules due to
Corporation C subtracts its
ACE of $25,000. If Corporation A has
transition provisions of the Tax Reform
pre-adjustment AMTI from its ACE in
line 3 pre-adjustment AMTI in the
Act of 1986.
each of the years and then multiplies
amounts shown below, its line 3 and
Refigure depreciation for the AMT
the result by 75% to get the following
line 4a amounts would be combined as
using the straight line method for real
potential ACE adjustments for 2006
follows to determine the amount to
property for which accelerated
enter on line 4b.
through 2010.
depreciation was determined for the
ACE minus
Potential
regular tax using pre-1987 rules. Use a
pre-adjustment
ACE
Line 4a ACE
$25,000 $25,000 $25,000
recovery period of 19 years for 19-year
adjustment
real property and 15 years for
Year
AMTI
Line 3 pre-adj.
low-income housing property. Figure
AMTI
10,000
30,000 (50,000)
2006
$(100,000)
$ (75,000)
the excess of the regular tax
2007
300,000
225,000
Amount to enter
depreciation over the AMT depreciation
2008
(100,000)
(75,000)
on line 4b
$15,000 $(5,000) $75,000
separately for each property and
2009
(400,000)
(300,000)
include only positive adjustments on
2010
150,000
112,500
Example 2. Corporation B has line 4a
line 2o.
ACE of $(25,000). If Corporation B has
The adjustment for leased personal
Under these facts, Corporation C
line 3 pre-adjustment AMTI in the
property only applies to personal
has the following increases or
amounts shown below, its line 3 and
holding companies. For leased
reductions in AMTI for 2006 through
line 4a amounts would be combined as
personal property other than recovery
2010.
follows to determine the amount to
property, enter the excess of the
enter on line 4b.
Increase or (reduction)
depreciation claimed for the property for
in AMTI from ACE
the regular tax using pre-1987 rules
Year
adjustment
Line 4a ACE
$(25,000) $(25,000) $(25,000)
over the depreciation allowable for the
2006
$0
AMT as refigured using the straight line
Line 3 pre-adj.
2007
225,000
method.
AMTI
(10,000) (30,000)
50,000
2008
(75,000)
For leased 10-year recovery
2009
(150,000)
property and leased 15-year public
Amount to enter
2010
112,500
on line 4b
$(15,000)
$5,000 $(75,000)
utility property, enter the excess of the
regular tax depreciation over the
In 2006, Corporation C was not
Line 4d. A potential negative ACE
depreciation allowable using the
allowed to reduce its AMTI by any part
adjustment (that is, a negative amount
straight line method with a half-year
of the potential negative ACE
on line 4b multiplied by 75%) is allowed
convention, no salvage value, and a
adjustment because it had no increases
as a negative ACE adjustment on line
recovery period of 15 years (22 years
in AMTI from prior year ACE
4e only if the corporation’s total
for 15-year public utility property).
adjustments.
increases in AMTI from prior year ACE
Figure this amount separately for
adjustments exceed its total reductions
In 2007, Corporation C had to
each property and include only positive
in AMTI from prior year ACE
increase its AMTI by the full amount of
adjustments on line 2o.
adjustments (line 4d). The purpose of
its potential ACE adjustment. It was not
Related adjustments. AMT
line 4d is to provide a “running balance”
allowed to use any part of its 2006
adjustments and preferences may
of this limitation amount. As such, the
unallowed potential negative ACE
affect deductions that are based on an
corporation must keep adequate
adjustment of $75,000 to reduce its
income limit (for example, charitable
records (for example, a copy of Form
2007 positive ACE adjustment of
contributions). Refigure these
4626 completed at least through line 5)
$225,000.
deductions using the income limit as
from year to year (even in years in
In 2008, Corporation C was allowed
modified for the AMT. Include on line
which it does not owe any AMT).
to reduce its AMTI by the full amount of
2o an adjustment for the difference
its potential negative ACE adjustment
Any potential negative ACE
between the regular tax and AMT
because that amount is less than its
adjustment that is not allowed as a
amounts for all such deductions. If the
line 4d limit of $225,000.
negative ACE adjustment in a tax year
AMT deduction is more than the regular
because of the line 4d limitation cannot
tax deduction, include the difference as
In 2009, Corporation C was allowed
be used to reduce a positive ACE
a negative amount.
to reduce its AMTI by only $150,000. Its
adjustment in any other tax year.
potential negative ACE adjustment of
Line 4. Adjusted Current
Combine lines 4d and 4e of the 2008
$300,000 was limited to its 2007
Form 4626 and enter the result on line
increase in AMTI of $225,000 minus its
Earnings (ACE)
4d of the 2010 form, but do not enter
2008 reduction in AMTI of $75,000.
less than zero.
Adjustment
In 2010, Corporation C must
Example. Corporation C, a
increase its AMTI by the full amount of
The ACE adjustment does not
calendar-year corporation, was
its potential ACE adjustment. It cannot
!
apply to a regulated investment
incorporated January 1, 2006. Its ACE
use any part of its 2009 unallowed
company or a real estate
and pre-adjustment AMTI for 2006
potential negative ACE adjustment of
CAUTION
investment trust. Also, for an affiliated
through 2010 were as follows.
$150,000 to reduce its 2010 positive
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