Instructions For Alternative Minimum Tax - Corporations Form 4626

amount of installment sale income

because of the line 4d limitation cannot

Line 4. Adjusted Current

reported for the regular tax.

be used to reduce a positive ACE

Earnings (ACE)

adjustment in any other tax year.

Combine lines 4d and 4e of the 2003

Accelerated depreciation of real

Adjustment

Form 4626 and enter the result on line

property and certain leased personal

4d of the 2004 form, but do not enter

property (pre-1987).

The ACE adjustment does not

less than zero.

apply to a regulated investment

Example. Corporation C, a

This preference generally

company or a real estate

CAUTION

calendar-year corporation, was

applies only to property placed

investment trust. Also, for an affiliated

incorporated January 1, 2000. Its ACE

in service after 1987, but

CAUTION

group filing a consolidated return under

and pre-adjustment AMTI for 2000

depreciated using pre-1987 rules due to

the rules of section 1501, figure line 4b

through 2004 were as follows.

transition provisions of the Tax Reform

on a consolidated basis.

Act of 1986.

Pre-

Line 4b. The following examples

adjustment

illustrate the manner in which line 3 is

Year

ACE

AMTI

Refigure depreciation for the AMT

subtracted from line 4a to get the

using the straight line method for real

2000

$700,000

$800,000

amount to enter on line 4b.

property for which accelerated

2001

900,000

600,000

Example 1. Corporation A has line 4a

depreciation was determined for the

2002

400,000

500,000

ACE of $25,000. If Corporation A has

regular tax using pre-1987 rules. Use a

2003

(100,000)

300,000

line 3 pre-adjustment AMTI in the

recovery period of 19 years for 19-year

2004

250,000

100,000

amounts shown below, its line 3 and

real property and 15 years for

line 4a amounts would be combined as

Corporation C subtracts its

low-income housing property. Figure

follows to determine the amount to

pre-adjustment AMTI from its ACE in

the excess of the regular tax

enter on line 4b.

each of the years and then multiplies

depreciation over the AMT depreciation

the result by 75% to get the following

separately for each property and

potential ACE adjustments for 2000

include only positive adjustments on

Line 4a ACE

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

through 2004.

line 2o.

Line 3 pre-adj.

ACE minus

Potential

AMTI

10,000

30,000 (50,000)

The adjustment for leased personal

pre-adjustment

ACE

Year

AMTI

adjustment

property only applies to personal

Amount to enter

holding companies. For leased

on line 4b

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

2000

$(100,000)

$ (75,000)

personal property other than recovery

2001

300,000

225,000

Example 2. Corporation B has line 4a

property, enter the excess of the

2002

(100,000)

(75,000)

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

depreciation claimed for the property for

2003

(400,000)

(300,000)

line 3 pre-adjustment AMTI in the

the regular tax using pre-1987 rules

2004

150,000

112,500

amounts shown below, its line 3 and

over the depreciation allowable for the

line 4a amounts would be combined as

AMT as refigured using the straight line

Under these facts, Corporation C

follows to determine the amount to

method.

has the following increases or

enter on line 4b.

reductions in AMTI for 2000 through

2004.

For leased 10-year recovery

property and leased 15-year public

Line 4a ACE

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

Increase or (reduction)

utility property, enter the excess of the

in AMTI from ACE

Line 3 pre-adj.

regular tax depreciation over the

Year

adjustment

AMTI

(10,000) (30,000)

50,000

depreciation allowable using the

2000

straight line method with a half-year

Amount to enter

2001

225,000

convention, no salvage value, and a

on line 4b

$(15,000)

$5,000 $(75,000)

2002

(75,000)

recovery period of 15 years (22 years

2003

(150,000)

for 15-year public utility property).

Line 4d. A potential negative ACE

2004

112,500

adjustment (that is, a negative amount

on line 4b multiplied by 75%) is allowed

Figure this amount separately for

In 2000, Corporation C was not

as a negative ACE adjustment on line

each property and include only positive

allowed to reduce its AMTI by any part

4e only if the corporation’s total

adjustments on line 2o.

of the potential negative ACE

increases in AMTI from prior year ACE

adjustment because it had no increases

adjustments exceed its total reductions

Related adjustments. AMT

in AMTI from prior year ACE

adjustments and preferences may

adjustments.

adjustments (line 4d). The purpose of

affect deductions that are based on an

line 4d is to provide a “running balance”

In 2001, Corporation C had to

income limit (for example, charitable

of this limitation amount. As such, the

increase its AMTI by the full amount of

contributions). Refigure these

corporation must keep adequate

its potential ACE adjustment. It was not

deductions using the income limit as

records (for example, a copy of Form

allowed to use any part of its 2000

modified for the AMT. Include on line

4626 completed at least through line 5)

unallowed potential negative ACE

2o an adjustment for the difference

from year to year (even in years in

adjustment of $75,000 to reduce its

between the regular tax and AMT

which it does not owe any AMT).

2001 positive ACE adjustment of

amounts for all such deductions. If the

$225,000.

AMT deduction is more than the regular

Any potential negative ACE

tax deduction, include the difference as

adjustment that is not allowed as a

In 2002, Corporation C was allowed

a negative amount.

negative ACE adjustment in a tax year

to reduce its AMTI by the full amount of

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Instructions For Alternative Minimum Tax - Corporations Form 4626 - 2004 Page 6

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