Instructions For Alternative Minimum Tax - Corporations Form 4626

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168(f)(5)(A)(i) or original ACRS by

Line 3d. Include in ACE the income on

Meals and entertainment expenses

section 168(e)(4), as in effect before

life insurance contracts (as determined

that exceed the limitations of section

the Tax Reform Act of 1986.

under section 7702(g)) for the tax year

274;

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minus the part of any premium

Federal taxes disallowed under

Line 2c. Total ACE depreciation.

attributable to insurance coverage.

section 275; and

Subtract line 2b(7) from line 2a and

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Golden parachute payments that

enter the result on line 2c. If line 2b(7)

Line 3e. Do not include any adjustment

exceed the limitation of section 280G.

exceeds line 2a, enter the difference as

related to the E&P effects of any

a negative amount.

Line 4e. Do not include any adjustment

charitable contribution.

related to the E&P effects of any

Line 3. Inclusion in ACE of

Line 4. Disallowance of Items

charitable contribution.

Items Included in Earnings and

Not Deductible From E&P

Profits (E&P)

Line 5. Other Adjustments

Generally, no deduction is allowed

In general, any income item that is not

Line 5a. Except as noted below, in

when figuring ACE for items not taken

taken into account (see below) in

figuring ACE, determine the deduction

into account (see below) in figuring

determining the corporation’s

E&P for the tax year. These amounts

for intangible drilling costs under

pre-adjustment AMTI but that is taken

increase ACE if they are deductible in

section 312(n)(2)(A).

into account in determining its E&P

figuring pre-adjustment AMTI (that is,

Subtract the ACE expense (if any)

must be included in ACE. Any such

they would be positive adjustments).

from the AMT expense (used to figure

income item may be reduced by all

line 2n of Form 4626) and enter the

However, there are exceptions. Do

items related to that income item and

result on line 5a. If the ACE expense

not add back:

that would be deductible when figuring

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exceeds the AMT amount, enter the

Any deduction allowable under

pre-adjustment AMTI if the income

result as a negative amount.

section 243 or 245 for any dividend that

items to which they relate were

qualifies for a 100% dividends-received

included in the corporation’s

Exception. The above rule does not

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

pre-adjustment AMTI for the tax year.

apply to amounts paid or incurred for

or 245(c) and

Examples of adjustments for these

any oil or gas well by corporations that

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Any dividend received from a

income items include:

are independent producers (that is, not

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20%-owned corporation (see section

Interest income from tax-exempt

integrated oil companies as defined in

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

obligations excluded under section 103

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

from income of the paying corporation

minus any costs incurred in carrying

applies, do not enter an amount on line

that is subject to Federal income tax.

these tax-exempt obligations and

5a for oil and gas wells.

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Proceeds of life insurance contracts

Special rules apply to the following.

Line 5b. When figuring ACE, the

excluded under section 101 minus the

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Dividends from section 936

current year deduction for circulation

basis in the contract for purposes of

corporations (including section 30A

expenditures under section 173 does

ACE.

corporations) (section 56(g)(4)(C)(iii)).

not apply. Therefore, treat circulation

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An income item is considered taken

Certain dividends received by certain

expenditures for ACE using the case

into account without regard to the

cooperatives (section 56(g)(4)(C)(iv)).

law that existed before section 173 was

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timing of its inclusion in a corporation’s

Certain distributions from controlled

enacted.

pre-adjustment AMTI or its E&P. Only

foreign corporations under section 965

income items that are permanently

Subtract the ACE expense (if any)

(section 56(g)(4)(C)(vi)).

excluded from pre-adjustment AMTI are

from the regular tax expense (for a

An item is considered taken into

included in ACE. An income item will

personal holding company, from the

account without regard to the timing of

not be considered taken into account

AMT expense used to figure line 2d of

its deductibility in figuring

merely because the proceeds from that

Form 4626) and enter the result on line

pre-adjustment AMTI or E&P.

item might eventually be reflected in the

5b. If the ACE expense exceeds the

Therefore, only deduction items that are

pre-adjustment AMTI of another

regular tax amount (for a personal

permanently disallowed in figuring E&P

taxpayer (for example, that of a

holding company, the AMT amount),

are disallowed in figuring ACE.

shareholder) on the liquidation or

enter the result as a negative amount.

disposal of a business.

Items for which no adjustment is

Do not make this adjustment for

Exceptions. Do not make an

necessary. Generally, no deduction is

expenditures for which the

adjustment for the following.

allowed for an item in figuring ACE if

corporation elected the optional

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CAUTION

Any income from discharge of

the item is not deductible in figuring

3-year write-off under section 59(e) for

indebtedness excluded from gross

pre-adjustment AMTI (even if the item

the regular tax.

income under section 108 (or the

is deductible in figuring E&P). The only

corresponding provision of prior law).

exceptions to this general rule are the

Line 5c. When figuring ACE, the

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Any extraterritorial income excluded

related reductions to an income item

amortization provisions of section 248

from gross income under section 114.

described in the second sentence of

do not apply. Therefore, charge all

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For an insurance company taxed

the instructions for line 3 above.

organizational expenditures to a capital

under section 831(b), any amount not

Deductions that are not allowed in

account and do not take them into

included in gross investment income

figuring ACE include:

account when figuring ACE until the

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(as defined in section 834(b)).

Capital losses that exceed capital

corporation is sold or otherwise

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Any special subsidy payment for

gains;

disposed of. Enter on line 5c all

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prescription drug plans excluded from

Bribes, fines, and penalties

amortization deductions for

gross income under section 139A.

disallowed under section 162;

organizational expenditures that were

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Any qualified shipping income

Charitable contributions that exceed

taken for the regular tax during the tax

excluded under section 1357.

the limitations of section 170;

year.

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Instructions For Alternative Minimum Tax - Corporations Form 4626 - 2004 Page 9

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