Instructions For Form 4626 - 2001 (Page 4 of 11) in pdf

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Subtract this AMT basis from the sales

installment sale income reported for the

A regular tax gain that exceeds the

price to get the AMT gain or loss.

regular tax.

AMT gain.

Important: The corporation may also

Line 2k—Passive Activities

Line 2h—Merchant Marine

have gains or losses from lines 2j, 2k,

Capital Construction Funds

Note: This adjustment applies only to

and 2l that must be considered on line

closely held corporations and personal

2e. For example, if for the regular tax

Amounts deposited in these funds

service corporations.

the corporation reports a loss from the

(established under section 607 of the

disposition of an asset used in a

Merchant Marine Act of 1936) are not

Refigure all passive activity gains

passive activity, include the loss in the

deductible for the AMT. Earnings on

and losses reported for the regular tax

computations for line 2k to determine if

these funds are not excludable from

by taking into account the corporation’s

any passive activity loss is limited for

gross income for the AMT. If the

AMT adjustments, preferences, and

the AMT. Then, include the AMT

corporation deducted these amounts or

AMT prior year unallowed losses.

passive activity loss allowed that relates

excluded them from income for the

Determine the corporation’s AMT

to the disposition of the asset on line 2e

regular tax, add them back on line 2h.

passive activity gain or loss using the

in determining the corporation’s AMT

See section 56(c)(2) for details.

same rules used for the regular tax. If

basis adjustment. It may be helpful to

the corporation is insolvent, see section

refigure for the AMT Form 8810 and

Line 2i—Section 833(b)

58(c)(1).

related worksheets, Schedule D (Form

Deduction

Disallowed losses of a personal

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

This deduction is not allowed for the

service corporation are suspended until

4797.

AMT. If the corporation took this

the corporation has income from that

Enter the difference between the

deduction for the regular tax, add it

(or any other) passive activity or until

regular tax gain or loss and the AMT

back on line 2i.

the passive activity is disposed of (i.e.,

gain or loss. Enter the difference as a

its passive losses cannot offset “net

negative amount if:

Line 2j—Tax Shelter Farm

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active income” (defined in section

The AMT gain is less than the regular

Activities

469(e)(2)(B)) or “portfolio income”).

tax gain,

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Disallowed losses of a closely held

The AMT loss exceeds the regular

Important: Complete this line only if

corporation that is not a personal

tax loss, or

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the corporation is a personal service

service corporation are treated the

The corporation has an AMT loss

corporation and it has a gain or loss

same except that, in addition, they may

and a regular tax gain.

from a tax shelter farm activity (as

be used to offset “net active income.”

defined in section 58(a)(2)) that is not a

Line 2f—Long-Term

Note: Keep adequate records for

passive activity. If the tax shelter farm

losses that are not deductible (and

Contracts

activity is a passive activity, include the

therefore carried forward) for both the

For the AMT, the corporation generally

gain or loss in the computations for line

AMT and regular tax.

must use the percentage-of-completion

2k.

Enter on line 2k the difference

method described in section 460(b) to

Refigure all gains and losses

between the AMT gain or loss and the

determine the taxable income from any

reported for the regular tax from tax

regular tax gain or loss. Enter the

long-term contract (defined in section

shelter farm activities by taking into

difference as a negative amount if the

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

account any AMT adjustments and

corporation had:

apply to any home construction contract

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preferences. Determine the AMT gain

An AMT loss and a regular tax gain,

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

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or loss using the rules for the regular

An AMT loss that exceeds the

tax with the following modifications.

For contracts excepted from the

regular tax loss, or

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percentage-of-completion method for

No loss is allowed except to the

A regular tax gain that exceeds the

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

extent the personal service corporation

AMT gain.

determine the percentage of completion

is insolvent (see section 58(c)(1)).

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Tax Shelter Farm Activities That

using the simplified procedures for

Do not use a loss in the current tax

Are Passive Activities

allocating costs outlined in section

year to offset gains from other tax

460(b)(3).

shelter farm activities. Instead, suspend

Refigure all gains and losses reported

any loss and carry it forward indefinitely

for the regular tax by taking into

Subtract the regular tax income from

until the corporation has a gain in a

account the corporation’s AMT

the AMT income. Enter the difference

subsequent tax year from that same tax

adjustments and preferences and AMT

on line 2f. If the AMT income is less

shelter farm activity or it disposes of the

prior year unallowed losses.

than the regular tax income, enter the

activity.

difference as a negative amount.

Use the same rules as outlined

Note: Keep adequate records for

above for other passive assets, with the

Line 2g—Installment Sales

losses that are not deductible (and

following modifications.

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therefore carried forward) for both the

The installment method does not apply

AMT gains from tax shelter farm

AMT and regular tax.

for the AMT to any nondealer

activities that are passive activities may

disposition of property that occurred

Enter on line 2j the difference

be used to offset AMT losses from

after August 16, 1986, but before the

between the AMT gain or loss and the

other passive activities.

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first day of the corporation’s tax year

regular tax gain or loss. Enter the

AMT losses from tax shelter farm

that began in 1987, if an installment

difference as a negative amount if the

activities that are passive activities may

obligation to which the proportionate

corporation had:

not be used to offset AMT gains from

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disallowance rule applied arose from

An AMT loss and a regular tax gain,

other passive activities. These losses

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the disposition. Enter as a negative

An AMT loss that exceeds the

must be suspended and carried forward

adjustment on line 2g the amount of

regular tax loss, or

indefinitely until the corporation has a

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Instructions For Form 4626 - 2001 Page 4

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