Instructions For Alternative Minimum Tax - Corporations Form 4626

corporation reports a loss from the

(or any other) passive activity or until

Line 2i. Tax Shelter Farm

disposition of an asset used in a

the passive activity is disposed of (that

Activities

passive activity, include the loss in the

is, its passive losses cannot offset “net

computations for line 2j to determine if

active income” (defined in section

Complete this line only if the

any passive activity loss is limited for

469(e)(2)(B) or “portfolio income”)).

corporation is a personal service

the AMT. Then, include the AMT

Disallowed losses of a closely held

corporation and it has a gain or

CAUTION

passive activity loss allowed that relates

corporation that is not a personal

loss from a tax shelter farm activity that

to the disposition of the asset on line 2e

service corporation are treated the

is not a passive activity. If the tax

in determining the corporation’s AMT

same except that, in addition, they may

shelter farm activity is a passive

basis adjustment. It may be helpful to

be used to offset “net active income.”

activity, include the gain or loss in the

refigure the following for the AMT: Form

computations for line 2j.

Keep adequate records for

8810 and related worksheets, Schedule

TIP

losses that are not deductible

Refigure all gains and losses

D (Form 1120), Form 4684 (Section B),

(and therefore carried forward)

reported for the regular tax from tax

or Form 4797.

for both the AMT and regular tax.

shelter farm activities by taking into

Enter on line 2e the difference

account any AMT adjustments and

Enter on line 2j the difference

between the regular tax gain or loss

preferences. Determine the AMT gain

between the AMT gain or loss and the

and the AMT gain or loss. Enter the

or loss using the rules for the regular

regular tax gain or loss. Enter the

difference as a negative amount if any

tax with the following modifications.

difference as a negative amount if the

•

of the following apply.

No loss is allowed except to the

corporation had:

•

The AMT gain is less than the regular

extent the personal service corporation

An AMT loss and a regular tax gain,

•

tax gain.

is insolvent.

An AMT loss that exceeds the

•

The AMT loss exceeds the regular

Do not use a loss in the current tax

regular tax loss, or

•

tax loss.

year to offset gains from other tax

A regular tax gain that exceeds the

•

The corporation has an AMT loss

shelter farm activities. Instead, suspend

AMT gain.

and a regular tax gain.

any loss and carry it forward indefinitely

Tax Shelter Farm Activities That

until the corporation has a gain in a

Line 2f. Long-Term Contracts

Are Passive Activities

subsequent tax year from that same tax

shelter farm activity or it disposes of the

For the AMT, the corporation generally

Refigure all gains and losses reported

activity.

must use the percentage-of-completion

for the regular tax by taking into

method described in section 460(b) to

account the corporation’s AMT

Keep adequate records for

determine the taxable income from any

adjustments and preferences and AMT

losses that are not deductible

TIP

long-term contract (defined in section

prior year unallowed losses.

(and therefore carried forward)

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

Use the same rules as outlined

for both the AMT and regular tax.

apply to any home construction contract

above for other passive activities, with

Enter on line 2i the difference

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

the following modifications.

between the AMT gain or loss and the

•

AMT gains from tax shelter farm

For contracts excepted from the

regular tax gain or loss. Enter the

activities that are passive activities may

percentage-of-completion method for

difference as a negative amount if the

be used to offset AMT losses from

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

corporation had:

•

other passive activities.

determine the percentage of completion

An AMT loss and a regular tax gain,

•

AMT losses from tax shelter farm

using the simplified procedures for

An AMT loss that exceeds the

activities that are passive activities may

allocating costs outlined in section

regular tax loss, or

•

not be used to offset AMT gains from

460(b)(3).

A regular tax gain that exceeds the

other passive activities. These losses

AMT gain.

Subtract the regular tax income from

must be suspended and carried forward

the AMT income. Enter the difference

Line 2j. Passive Activities

indefinitely until the corporation has a

on line 2f. If the AMT income is less

gain in a subsequent year from that

than the regular tax income, enter the

same activity or it disposes of the

This adjustment applies only to

difference as a negative amount.

activity.

closely held corporations and

personal service corporations.

CAUTION

Line 2k. Loss Limitations

Line 2g. Merchant Marine

Refigure all passive activity gains

Capital Construction Funds

Refigure gains and losses reported for

and losses reported for the regular tax

the regular tax from at-risk activities

Amounts deposited in these funds are

by taking into account the corporation’s

and partnerships by taking into account

not deductible for the AMT. Earnings on

AMT adjustments and preferences and

the corporation’s AMT adjustments and

these funds must be included in gross

AMT prior year unallowed losses.

preferences. If the corporation has

income for the AMT. If the corporation

Determine the corporation’s AMT

recomputed losses that must be limited

deducted these amounts or excluded

passive activity gain or loss using the

for the AMT by section 465 or section

them from income for the regular tax,

same rules used for the regular tax.

704(d) or the corporation reported

add them back on line 2g.

Generally, no loss is allowed. However,

losses for the regular tax from at-risk

if the corporation is insolvent, losses

activities or partnerships that were

Line 2h. Section 833(b)

are allowed to the extent the

limited by those sections, figure the

Deduction

corporation is insolvent (see section

difference between the loss limited for

58(c)).

This deduction is not allowed for the

the AMT and the loss limited for the

AMT. If the corporation took this

Disallowed losses of a personal

regular tax for each applicable at-risk

deduction for the regular tax, add it

service corporation are suspended until

activity or partnership. “Loss limited”

back on line 2h.

the corporation has income from that

means the amount of loss that is not

-4-

Instructions For Alternative Minimum Tax - Corporations Form 4626 - 2004 Page 4

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