Instructions For Form 4626 - Alternative Minimum Tax - Corporations

Domestic production activities

convention, no salvage value, and a

as a negative ACE adjustment on line

deduction. For the AMT, figure the

recovery period of 15 years (22 years

4e only if the corporation’s total

corporation’s domestic production

for 15-year public utility property).

increases in AMTI from prior year ACE

activities deduction under section 199

adjustments exceed its total reductions

Figure this amount separately for

without taking into account any AMT

in AMTI from prior year ACE

each property and include only positive

adjustments and preferences. The

adjustments (line 4d). The purpose of

adjustments on line 2o.

section 199 deduction for the

line 4d is to provide a “running balance”

Related adjustments. AMT

corporation’s AMT is 6% of the smaller

of this limitation amount. As such, the

adjustments and preferences may

of (a) the qualified production activities

corporation must keep adequate

affect deductions that are based on an

income or (b) the alternative minimum

records (for example, a copy of Form

income limit (for example, charitable

taxable income (AMTI), determined

4626 completed at least through line 5)

contributions). Refigure these

without taking into account the section

from year to year (even in years in

deductions using the income limit as

199 deduction. Subtract the

which it does not owe any AMT).

modified for the AMT. Include on line

corporation’s AMT section 199

Any potential negative ACE

2o an adjustment for the difference

deduction from its regular tax section

adjustment that is not allowed as a

between the regular tax and AMT

199 deduction and include the result on

negative ACE adjustment in a tax year

amounts for all such deductions. If the

line 2o. If the AMT deduction is more

because of the line 4d limitation cannot

AMT deduction is more than the regular

than the regular tax deduction, include

be used to reduce a positive ACE

tax deduction, include the difference as

the result as a negative amount.

adjustment in any other tax year.

a negative amount.

Combine lines 4d and 4e of the 2007

Installment sales. The installment

method does not apply for the AMT to

Form 4626 and enter the result on line

Line 4. Adjusted Current

any nondealer disposition of property

4d of the 2008 form, but do not enter

Earnings (ACE)

that occurred after August 16, 1986, but

less than zero.

before the first day of the corporation’s

Example. Corporation C, a

Adjustment

tax year that began in 1987, if an

calendar-year corporation, was

installment obligation to which the

incorporated January 1, 2004. Its ACE

The ACE adjustment does not

proportionate disallowance rule applied

and pre-adjustment AMTI for 2004

apply to a regulated investment

arose from the disposition. Include as a

through 2008 were as follows.

company or a real estate

negative adjustment on line 2o the

CAUTION

investment trust. Also, for an affiliated

Pre-

amount of installment sale income

adjustment

group filing a consolidated return under

reported for the regular tax.

Year

ACE

AMTI

the rules of section 1501, figure line 4b

Accelerated depreciation of real

on a consolidated basis.

2004

$700,000

$800,000

property and certain leased personal

Line 4b. The following examples

2005

900,000

600,000

property (pre-1987).

2006

400,000

500,000

illustrate the manner in which line 3 is

This preference generally

2007

(100,000)

300,000

subtracted from line 4a to get the

applies only to property placed

2008

250,000

100,000

amount to enter on line 4b.

in service after 1987, but

CAUTION

Example 1. Corporation A has line 4a

Corporation C subtracts its

depreciated using pre-1987 rules due to

ACE of $25,000. If Corporation A has

pre-adjustment AMTI from its ACE in

transition provisions of the Tax Reform

line 3 pre-adjustment AMTI in the

each of the years and then multiplies

Act of 1986.

amounts shown below, its line 3 and

the result by 75% to get the following

line 4a amounts would be combined as

Refigure depreciation for the AMT

potential ACE adjustments for 2004

follows to determine the amount to

using the straight line method for real

through 2008.

enter on line 4b.

property for which accelerated

ACE minus

Potential

depreciation was determined for the

pre-adjustment

ACE

regular tax using pre-1987 rules. Use a

Line 4a ACE

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

Year

AMTI

adjustment

recovery period of 19 years for 19-year

real property and 15 years for

Line 3 pre-adj.

2004

$(100,000)

$ (75,000)

low-income housing property. Figure

AMTI

10,000

30,000 (50,000)

2005

300,000

225,000

the excess of the regular tax

2006

(100,000)

(75,000)

Amount to enter

depreciation over the AMT depreciation

2007

(400,000)

(300,000)

on line 4b

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

separately for each property and

2008

150,000

112,500

include only positive adjustments on

Example 2. Corporation B has line 4a

Under these facts, Corporation C

line 2o.

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

has the following increases or

line 3 pre-adjustment AMTI in the

The adjustment for leased personal

reductions in AMTI for 2004 through

amounts shown below, its line 3 and

property only applies to personal

2008.

line 4a amounts would be combined as

holding companies. For leased

Increase or (reduction)

follows to determine the amount to

personal property other than recovery

in AMTI from ACE

property, enter the excess of the

enter on line 4b.

Year

adjustment

depreciation claimed for the property for

the regular tax using pre-1987 rules

2004

Line 4a ACE

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

over the depreciation allowable for the

2005

225,000

AMT as refigured using the straight line

Line 3 pre-adj.

2006

(75,000)

method.

AMTI

(10,000) (30,000)

50,000

2007

(150,000)

2008

112,500

For leased 10-year recovery

Amount to enter

property and leased 15-year public

on line 4b

$(15,000)

$5,000 $(75,000)

utility property, enter the excess of the

In 2004, Corporation C was not

regular tax depreciation over the

Line 4d. A potential negative ACE

allowed to reduce its AMTI by any part

depreciation allowable using the

adjustment (that is, a negative amount

of the potential negative ACE

straight line method with a half-year

on line 4b multiplied by 75%) is allowed

adjustment because it had no increases

-6-

Instructions For Form 4626 - Alternative Minimum Tax - Corporations - 2008 Page 6

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