Instructions For Form 4626 - Alternative Minimum Tax-Corporations - 2011 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
ACE
AMTI
on a consolidated basis.
Accelerated depreciation of real
Year
Line 4a
Line 3
property and certain leased personal
Line 4b. The following examples
property (pre-1987).
2007
$700,000
$800,000
illustrate the manner in which line 3 is
2008
900,000
600,000
subtracted from line 4a to get the
This preference generally
2009
400,000
500,000
amount to enter on line 4b.
!
applies only to property placed
2010
(100,000)
300,000
in service after 1987, but
Example 1. Corporation A has line 4a
CAUTION
2011
250,000
100,000
depreciated using pre-1987 rules due to
ACE of $25,000. If Corporation A has
transition provisions of the Tax Reform
line 3 pre-adjustment AMTI in the
Corporation C subtracts its
Act of 1986.
amounts shown below, its line 3 and
pre-adjustment AMTI from its ACE in
Refigure depreciation for the AMT
line 4a amounts would be combined as
each of the years and then multiplies
using the straight line method for real
follows to determine the amount to
the result by 75% to get the following
property for which accelerated
enter on line 4b.
potential ACE adjustments for 2007
depreciation was determined for the
through 2011.
regular tax using pre-1987 rules. Use a
Line 4a ACE
$25,000 $25,000 $25,000
ACE minus
Potential
recovery period of 19 years for 19-year
pre-adjustment
ACE
real property and 15 years for
Line 3 pre-adj.
AMTI
adjustment
low-income housing property. Figure
AMTI
10,000
30,000 (50,000)
Year
Line 4b
Line 4c
the excess of the regular tax
Amount to enter
depreciation over the AMT depreciation
2007
$(100,000)
$ (75,000)
on line 4b
$15,000 $(5,000) $75,000
separately for each property and
2008
300,000
225,000
include only positive adjustments on
2009
(100,000)
(75,000)
Example 2. Corporation B has line 4a
line 2o.
2010
(400,000)
(300,000)
ACE of $(25,000). If Corporation B has
2011
150,000
112,500
The adjustment for leased personal
line 3 pre-adjustment AMTI in the
property only applies to personal
amounts shown below, its line 3 and
holding companies. For leased
Under these facts, Corporation C
line 4a amounts would be combined as
personal property other than recovery
has the following increases or
follows to determine the amount to
property, enter the excess of the
reductions in AMTI for 2007 through
enter on line 4b.
depreciation claimed for the property for
2011.
the regular tax using pre-1987 rules
Increase or (reduction)
Line 4a ACE
$(25,000) $(25,000) $(25,000)
over the depreciation allowable for the
in AMTI from ACE
AMT as refigured using the straight line
adjustment
Line 3 pre-adj.
method.
Year
Line 4e
AMTI
(10,000) (30,000)
50,000
For leased 10-year recovery
2007
$0
property and leased 15-year public
Amount to enter
2008
225,000
utility property, enter the excess of the
on line 4b
$(15,000)
$5,000 $(75,000)
2009
(75,000)
regular tax depreciation over the
2010
(150,000)
Line 4d. A potential negative ACE
depreciation allowable using the
2011
112,500
adjustment (that is, a negative amount
straight line method with a half-year
on line 4b multiplied by 75%) is allowed
convention, no salvage value, and a
In 2007, Corporation C was not
as a negative ACE adjustment on line
recovery period of 15 years (22 years
allowed to reduce its AMTI by any part
4e only if the corporation’s total
for 15-year public utility property).
of the potential negative ACE
increases in AMTI from prior year ACE
Figure this amount separately for
adjustment because it had no increases
adjustments exceed its total reductions
each property and include only positive
in AMTI from prior year ACE
in AMTI from prior year ACE
adjustments on line 2o.
adjustments.
adjustments (line 4d). The purpose of
Related adjustments. AMT
line 4d is to provide a “running balance”
In 2008, Corporation C had to
adjustments and preferences may
of this limitation amount. As such, the
increase its AMTI by the full amount of
affect deductions that are based on an
corporation must keep adequate
its potential ACE adjustment. It was not
income limit (for example, charitable
records (for example, a copy of Form
allowed to use any part of its 2007
contributions). Refigure these
4626 completed at least through line 5)
unallowed potential negative ACE
deductions using the income limit as
from year to year (even in years in
adjustment of $75,000 to reduce its
modified for the AMT. Include on line
which it does not owe any AMT).
2008 positive ACE adjustment of
2o an adjustment for the difference
$225,000.
Any potential negative ACE
between the regular tax and AMT
In 2009, Corporation C was allowed
adjustment that is not allowed as a
amounts for all such deductions. If the
to reduce its AMTI by the full amount of
negative ACE adjustment in a tax year
AMT deduction is more than the regular
its potential negative ACE adjustment
because of the line 4d limitation cannot
tax deduction, include the difference as
because that amount is less than its
be used to reduce a positive ACE
a negative amount.
line 4d limit of $225,000.
adjustment in any other tax year.
Line 4. Adjusted Current
Combine lines 4d and 4e of the 2010
In 2010, Corporation C was allowed
Form 4626 and enter the result on line
to reduce its AMTI by only $150,000. Its
Earnings (ACE)
4d of the 2011 form, but do not enter
potential negative ACE adjustment of
less than zero.
Adjustment
$300,000 was limited to its 2008
increase in AMTI of $225,000 minus its
Example. Corporation C, a
2009 reduction in AMTI of $75,000.
The ACE adjustment does not
calendar-year corporation, was
!
apply to a regulated investment
incorporated January 1, 2007. Its ACE
In 2011, Corporation C must
company or a real estate
and pre-adjustment AMTI for 2007
increase its AMTI by the full amount of
CAUTION
investment trust. Also, for an affiliated
through 2011 were as follows.
its potential ACE adjustment. It cannot
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