Instructions For Form 4626 - Alternative Minimum Tax-Corporations

deduction for the regular tax, add it

the passive activity is disposed of (i.e.,

Enter the difference between the

back on line 2i.

its passive losses cannot offset “net

regular tax gain or loss and the AMT

active income” (defined in section

gain or loss. Enter the difference as a

Line 2j—Tax Shelter Farm

469(e)(2)(B)) or “portfolio income”).

negative amount if:

•

Activities

Disallowed losses of a closely held

The AMT gain is less than the regular

corporation that is not a personal

tax gain,

Important: Complete this line only if

•

service corporation are treated the

The AMT loss exceeds the regular

the corporation is a personal service

same except that, in addition, they may

tax loss, or

corporation and it has a gain or loss

•

be used to offset “net active income.”

The corporation has an AMT loss

from a tax shelter farm activity (as

and a regular tax gain.

Note: Keep adequate records for

defined in section 58(a)(2)) that is not a

losses that are not deductible (and

passive activity. If the tax shelter farm

Line 2f—Long-Term

therefore carried forward) for both the

activity is a passive activity, include the

Contracts

AMT and regular tax.

gain or loss in the computations for line

For the AMT, the corporation generally

2k.

Enter on line 2k the difference

must use the percentage-of-completion

between the AMT gain or loss and the

Refigure all gains and losses

method described in section 460(b) to

regular tax gain or loss. Enter the

reported for the regular tax from tax

determine the taxable income from any

difference as a negative amount if the

shelter farm activities by taking into

long-term contract (defined in section

corporation had:

account any AMT adjustments and

•

460(f)). However, this rule does not

An AMT loss and a regular tax gain,

preferences. Determine the AMT gain

•

apply to any home construction contract

An AMT loss that exceeds the

or loss using the rules for the regular

(as defined in section 460(e)(6)).

regular tax loss, or

tax with the following modifications.

•

A regular tax gain that exceeds the

No loss is allowed except to the

For contracts excepted from the

AMT gain.

extent the personal service corporation

percentage-of-completion method for

is insolvent (see section 58(c)(1)).

the regular tax by section 460(e)(1),

Tax Shelter Farm Activities That

•

Do not use a loss in the current tax

determine the percentage of completion

Are Passive Activities

year to offset gains from other tax

using the simplified procedures for

Refigure all gains and losses reported

shelter farm activities. Instead, suspend

allocating costs outlined in section

for the regular tax by taking into

any loss and carry it forward indefinitely

460(b)(3).

account the corporation’s AMT

until the corporation has a gain in a

Subtract the regular tax income from

adjustments and preferences and AMT

subsequent tax year from that same tax

the AMT income. Enter the difference

prior year unallowed losses.

shelter farm activity or it disposes of the

on line 2f. If the AMT income is less

activity.

Use the same rules as outlined

than the regular tax income, enter the

Note: Keep adequate records for

above for other passive assets, with the

difference as a negative amount.

losses that are not deductible (and

following modifications.

•

Line 2g—Installment Sales

therefore carried forward) for both the

AMT gains from tax shelter farm

AMT and regular tax.

activities that are passive activities may

The installment method does not apply

Enter on line 2j the difference

be used to offset AMT losses from

for the AMT to any nondealer

between the AMT gain or loss and the

other passive activities.

disposition of property that occurred

•

regular tax gain or loss. Enter the

AMT losses from tax shelter farm

after August 16, 1986, but before the

difference as a negative amount if the

activities that are passive activities may

first day of the corporation’s tax year

not be used to offset AMT gains from

corporation had:

that began in 1987, if an installment

•

An AMT loss and a regular tax gain,

other passive activities. These losses

obligation to which the proportionate

•

An AMT loss that exceeds the

must be suspended and carried forward

disallowance rule applied arose from

regular tax loss, or

indefinitely until the corporation has a

the disposition. Enter as a negative

•

A regular tax gain that exceeds the

gain in a subsequent year from that

adjustment on line 2g the amount of

AMT gain.

same activity or it disposes of the

installment sale income reported for the

activity.

regular tax.

Line 2k—Passive Activities

Line 2l—Loss Limitations

Line 2h—Merchant Marine

Note: This adjustment applies only to

Refigure gains and losses reported for

closely held corporations and personal

Capital Construction Funds

the regular tax from at-risk activities

service corporations.

Amounts deposited in these funds

and partnerships by taking into account

Refigure all passive activity gains

(established under section 607 of the

the corporation’s AMT adjustments and

and losses reported for the regular tax

Merchant Marine Act of 1936) are not

preferences. If the corporation has

by taking into account the corporation’s

deductible for the AMT. Earnings on

recomputed losses that must be limited

AMT adjustments, preferences, and

these funds are not excludable from

for the AMT (under section 59(h)) by

AMT prior year unallowed losses.

gross income for the AMT. If the

section 465 or section 704(d) or the

corporation deducted these amounts or

Determine the corporation’s AMT

corporation reported losses for the

excluded them from income for the

passive activity gain or loss using the

regular tax from at-risk activities or

regular tax, add them back on line 2h.

same rules used for the regular tax. If

partnerships that were limited by those

See section 56(c)(2) for details.

the corporation is insolvent, see section

sections, figure the difference between

58(c)(1).

the loss limited for the AMT and the

Line 2i—Section 833(b)

Disallowed losses of a personal

loss limited for the regular tax for each

Deduction

service corporation are suspended until

applicable at-risk activity or partnership.

This deduction is not allowed for the

the corporation has income from that

“Loss limited” means the amount of loss

AMT. If the corporation took this

(or any other) passive activity or until

that is not allowable for the year

-4-

Instructions For Form 4626 - Alternative Minimum Tax-Corporations - 2002 Page 4

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