Instructions For Form 4626 - Alternative Minimum Tax-Corporations

Line 2c. Subtract line 2b(7) from line

Line 4—Disallowance of Items

charitable contribution (section

2a and enter the result on line 2c. If line

56(g)(4)(I)).

Not Deductible From E&P

2b(7) exceeds line 2a, enter the

Generally, no deduction is allowed

Line 5—Other Adjustments

difference as a negative amount.

when figuring ACE for items not taken

Line 5a. Except as noted below, in

into account (see below) in figuring

Line 3—Inclusion in ACE of

figuring ACE, determine the deduction

E&P for the tax year. These amounts

Items Included in Earnings and

for intangible drilling costs (section

increase ACE if they are deductible in

Profits (E&P)

263(c)) under section 312(n)(2)(A).

figuring pre-adjustment AMTI (i.e., they

In general, any income item that is not

Subtract the ACE expense (if any)

would be positive adjustments).

taken into account (see below) in

from the AMT expense (used to figure

However, there are exceptions. Do

determining the corporation’s

line 2o of Form 4626) and enter the

not add back:

pre-adjustment AMTI but that is taken

result on line 5a. If the ACE expense

•

Any deduction allowable under

exceeds the AMT amount, enter the

into account in determining its E&P

section 243 or 245 for any dividend that

result as a negative amount.

must be included in ACE. Any such

qualifies for a 100% dividends-received

income item may be reduced by all

Exception. The above rule does not

deduction under section 243(a), 245(b),

items related to that income item and

apply to amounts paid or incurred for

or 245(c) and

that would be deductible when figuring

•

any oil or gas well by corporations other

Any dividend received from a

pre-adjustment AMTI if the income

than integrated oil companies (see

20%-owned corporation (see section

items to which they relate were

section 291(b)(4)). If this exception

243(c)(2)), but only if the dividend is

included in the corporation’s

applies, do not enter an amount on line

from income of the paying corporation

pre-adjustment AMTI for the tax year.

5a for oil and gas wells.

that is subject to Federal income tax.

Examples of adjustments for these

Line 5b. When figuring ACE, the

See sections 56(g)(4)(C)(iii) and (iv) for

income items include:

current year deduction for circulation

•

special rules for dividends from section

Interest income from tax-exempt

expenditures under section 173 does

936 corporations (including section 30A

obligations excluded under section 103

not apply. Therefore, treat circulation

corporations) and certain dividends

minus any costs incurred in carrying

expenditures for ACE using the case

received by certain cooperatives.

these tax-exempt obligations and

law that existed before section 173 was

•

An item is considered taken into

Proceeds of life insurance contracts

enacted.

account without regard to the timing of

excluded under section 101 minus the

its deductibility in figuring

Subtract the ACE expense (if any)

basis in the contract for purposes of

pre-adjustment AMTI or E&P.

from the regular tax expense (for a

ACE.

Therefore, only deduction items that are

personal holding company, from the

An income item is considered taken

permanently disallowed in figuring E&P

AMT expense used to figure line 2d of

into account without regard to the

are disallowed in figuring ACE.

Form 4626) and enter the result on line

timing of its inclusion in a corporation’s

5b. If the ACE expense exceeds the

pre-adjustment AMTI or its E&P. Only

Items described in Regulations

regular tax amount (for a personal

income items that are permanently

section 1.56(g)-1(e) for which no

holding company, the AMT amount),

excluded from pre-adjustment AMTI are

adjustment is necessary. Generally,

enter the result as a negative amount.

included in ACE. An income item will

no deduction is allowed for an item in

not be considered taken into account

Note: Do not make this adjustment for

figuring ACE if the item is not

merely because the proceeds from that

expenditures for which the corporation

deductible in figuring pre-adjustment

item might eventually be reflected in a

elected the optional 3-year writeoff

AMTI (even if the item is deductible in

corporation’s pre-adjustment AMTI

figuring E&P). The only exceptions to

under section 59(e) for the regular tax.

(e.g., that of a shareholder) on the

this general rule are the related

Line 5c. When figuring ACE, the

liquidation or disposal of a business.

reductions to an income item described

amortization provisions of section 248

in the second sentence of the

do not apply. Therefore, charge all

Exception. Do not make an

instructions for line 3 above.

organizational expenditures to a capital

adjustment for the following.

Deductions that are not allowed in

•

account and do not take them into

Any income from discharge of

figuring ACE include:

account when figuring ACE until the

indebtedness excluded from gross

•

Capital losses that exceed capital

corporation is sold or otherwise

income under section 108 (or the

gains;

disposed of. Enter on line 5c all

corresponding provision of prior law).

•

Bribes, fines, and penalties

•

amortization deductions for

Any extraterritorial income excluded

disallowed under section 162;

organizational expenditures that were

•

from gross income under section 114.

Charitable contributions that exceed

•

taken for the regular tax during the tax

For an insurance company taxed

the limitations of section 170;

year.

•

under section 831(b), any amount not

Meals and entertainment expenses

Line 5d. The adjustments provided in

included in gross investment income

that exceed the limitations of section

section 312(n)(4) apply in figuring ACE.

(as defined in section 834(b)).

274;

•

See Regulations section 1.56(g)-1(f)(3).

Federal taxes disallowed under

Line 3d. Include in ACE the income on

Line 5e. For any installment sale in a

section 275; and

life insurance contracts (as determined

•

tax year that began after 1989, the

Golden parachute payments that

under section 7702(g)) for the tax year

corporation generally cannot use the

exceed the limitation of section 280G.

minus the part of any premium

installment method to figure ACE.

attributable to insurance coverage.

Note: No adjustment is necessary for

However, it may use the installment

these items since they were not allowed

Line 3e. Do not include any adjustment

method for the applicable percentage

in figuring pre-adjustment AMTI.

related to the E&P effects of any

(as determined under section 453A) of

charitable contribution (section

Line 4e. Do not include any adjustment

the gain from any installment sale to

56(g)(4)(I)).

related to the E&P effects of any

which section 453A(a)(1) applies.

-9-

Instructions For Form 4626 - Alternative Minimum Tax-Corporations - 2002 Page 9

Related Articles

Related forms

Related Categories