Instructions For Form 4626 - Alternative Minimum Tax-Corporations

•

Net AMT adjustment from an

Example 1. Corporation A has line 4a

Pre-

adjustment

electing large partnership. If the

ACE of $25,000. If Corporation A has

Year

ACE

AMTI

corporation is a partner in an electing

line 3 pre-adjustment AMTI in the

large partnership, include on line 2r the

amounts shown below, its line 3

1998

$700,000

$800,000

amount from Schedule K-1 (Form

pre-adjustment AMTI and line 4a ACE

1999

900,000

600,000

1065-B), box 6. Also include on line 2r

would be combined as follows to

2000

400,000

500,000

any amount from Schedule K-1 (Form

determine the amount to enter on line

1065-B), box 5, unless the corporation

4b.

2001

(100,000)

300,000

is closely held or a personal service

2002

250,000

100,000

corporation. Closely held and personal

Line 4a ACE

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

service corporations should take any

Corporation C subtracts its

amount from box 5 into account when

pre-adjustment AMTI from its ACE in

Line 3 pre-adj.

figuring the amount to enter on line 2k.

AMTI

10,000

30,000 (50,000)

each of the years and then multiplies

•

Patron’s AMT adjustment.

the result by 75% to get the following

Distributions the corporation received

Amount to enter

potential ACE adjustments for 1998

on line 4b

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

from a cooperative may be includible in

through 2002.

income. Unless the distributions are

ACE minus

Potential

nontaxable, include on line 2r the total

Example 2. Corporation B has line 4a

pre-adjustment

ACE

AMT patronage dividend adjustment

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

Year

AMTI

adjustment

reported to the corporation from the

line 3 pre-adjustment AMTI in the

1998

$(100,000)

$ (75,000)

cooperative.

amounts shown below, its line 3

•

Cooperative’s AMT adjustment. If

pre-adjustment AMTI and line 4a ACE

1999

300,000

225,000

the corporation is a cooperative,

would be combined as shown below to

2000

(100,000)

(75,000)

refigure the cooperative’s deduction for

determine the amount to enter on line

2001

(400,000)

(300,000)

patronage dividends by taking into

4b.

account the cooperative’s AMT

2002

150,000

112,500

adjustments and preferences. Subtract

Line 4a ACE

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

Under these facts, Corporation C

the cooperative’s AMT deduction for

has the following increases or

patronage dividends from its regular tax

Line 3 pre-adj.

reductions in AMTI for 1998 through

deduction for patronage dividends and

AMTI

(10,000) (30,000)

50,000

2002.

include the result on line 2r. If the AMT

deduction is more than the regular tax

Amount to enter

Increase or (reduction)

on line 4b

$(15,000)

$5,000 $(75,000)

deduction, include the result as a

in AMTI from ACE

negative amount.

Year

adjustment

•

Related adjustments. AMT

Line 4d. A potential negative ACE

1998

adjustments and preferences may

adjustment (i.e., a negative amount on

1999

225,000

affect deductions that are based on an

line 4b multiplied by 75%) is allowed as

income limit (e.g., charitable

2000

(75,000)

a negative ACE adjustment on line 4e

contributions). Refigure these

only if the corporation’s total increases

2001

(150,000)

deductions using the income limit as

in AMTI from prior year ACE

2002

112,500

modified for the AMT. Include on line 2r

adjustments exceed its total reductions

an adjustment for the difference

in AMTI from prior year ACE

between the regular tax and AMT

In 1998, Corporation C was not

adjustments (line 4d). The purpose of

amounts for all such deductions. If the

allowed to reduce its AMTI by any part

line 4d is to provide a “running balance”

AMT deduction is more than the regular

of the potential negative ACE

of this limitation amount. As such, the

tax deduction, include the difference as

adjustment because it had no increases

corporation must keep adequate

a negative amount.

in AMTI from prior year ACE

records (e.g., a copy of Form 4626

adjustments.

completed at least through line 5) from

Line 4—Adjusted

year to year (even in years in which it

In 1999, Corporation C had to

does not owe any AMT).

Current Earnings (ACE)

increase its AMTI by the full amount of

its potential ACE adjustment. It was not

Any potential negative ACE

Adjustment

allowed to use any part of its 1998

adjustment that is not allowed as a

unallowed potential negative ACE

Note: The ACE adjustment does not

negative ACE adjustment in a tax year

adjustment of $75,000 to reduce its

apply to a regulated investment

because of the line 4d limitation may

1999 positive ACE adjustment of

company or a real estate investment

not be used to reduce a positive ACE

$225,000.

trust.

adjustment in any other tax year.

Line 4b

Combine lines 4d and 4e of the 2001

In 2000 Corporation C was allowed

Form 4626 and enter the result on line

to reduce its AMTI by the full amount of

Important: For an affiliated group filing

4d of the 2002 form, but do not enter

its potential negative ACE adjustment

a consolidated return under the rules of

less than zero.

because that amount is less than its

section 1501, figure line 4b on a

line 4d limit of $225,000.

consolidated basis.

Example. Corporation C, a

calendar-year corporation, was

In 2001, Corporation C was allowed

The following examples illustrate the

incorporated January 1, 1998. Its ACE

manner in which line 3 is subtracted

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

and pre-adjustment AMTI for 1998

from line 4a to get the amount to enter

potential negative ACE adjustment of

on line 4b.

through 2002 were as follows.

$300,000 was limited to its 1999

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Instructions For Form 4626 - Alternative Minimum Tax-Corporations - 2002 Page 6

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