Instructions For Form 4626 - Alternative Minimum Tax - Corporations

Exemption Phase-out Computation

the AMT foreign tax credit for the current tax

adjusted basis of its assets used for

year.

computing its ACE.

Lines 11a through 11c

Note also: The amount of any foreign tax

Note: Use these new adjusted bases for all

Line 11a.—In computing the reduction of the

credit that the corporation cannot claim (and

future ACE calculations (such as depreciation

tentative exemption amount, the line 10 AMTI

can therefore be carried back or carried over)

and gain or loss on disposition of an asset).

of all members of a controlled group of

for AMT purposes is likely to differ from the

Line 2a. Depreciation expense recomputed

corporations must be taken into account and

amount (if any) that is carried back or carried

for AMT purposes.—Enter the depreciation

any decrease of the tentative exemption

over for regular tax purposes. Keep adequate

expense you recomputed for AMT purposes

amount must be divided equally among the

records for both AMT purposes and regular

(i.e., the total depreciation expense deducted

members (unless all of the members consent

tax purposes.

in arriving at the pre-adjustment AMTI

to an unequal allocation). If you are preparing

Line 16.—Enter the corporation’s regular tax

reported on line 4 of Form 4626). Generally,

Form 4626 for a member of a controlled

liability for the tax year (as defined in section

the amount entered on this line is: (a) the

group of corporations, subtract that

26(b)) minus its foreign tax credit and its

depreciation expense the corporation claimed

member’s share of the $150,000 floor from

possessions tax credit. If you file Form 1120,

for regular tax purposes (Form 4562, line 20),

the member’s share of the combined line 10

this is line 3, Schedule J, minus the sum of

modified by (b) the AMT depreciation

AMTI of all members of the controlled group

lines 4a and 4b, Schedule J. Be sure to

adjustments reported on lines 2a, 3f, and 3g

of corporations and enter the difference on

include any tax on accumulation distribution

of Form 4626.

line 11a. See section 1561 for additional

of trusts you computed on Form 4970. Do

Line 2b(i). Property placed in service in a

information.

not include any increase in tax under section

tax year beginning after 1989.—Depreciate

Line 11c.—All members of a controlled group

49(b) or 50(a) due to recapture of investment

the basis of this property using the ADS

of corporations are limited to one $40,000

credit computed on Form 4255 or any

described in section 168(g). However, for

tentative exemption, which must be divided

increase in tax under section 42(j) or (k) due

property that is: (a) placed in service in a tax

equally among the members (unless all of the

to recapture of low-income housing credit

year beginning after 1989, and (b) described

members consent to an unequal allocation). If

computed on Form 8611.

in sections 168(f)(1) through (4), use the same

you are preparing Form 4626 for a member of

Line 18. Environmental tax.—If you are

depreciation expense claimed for regular tax

a controlled group of corporations, reduce

preparing Form 4626 for a regulated

purposes and enter it on line 2b(iv).

that member’s share of the $40,000 tentative

investment company or a real estate

Line 2b(ii). Property placed in service in a

exemption by the amount you entered on line

investment trust, skip line 18 (it does not

tax year beginning before 1990 to which

11b.

apply).

the modified accelerated cost recovery

Line 14. Alternative minimum tax foreign

Compute the environmental tax as follows:

system (MACRS) applies (i.e., generally

tax credit.—Refigure the foreign tax credit

property placed in service in tax years

1. Complete line 1 of Form 4626 without

claimed for regular tax purposes as follows:

beginning after 1986 and before 1990).—

taking into account any environmental tax

1. For each separate limitation, recompute

Depreciate the adjusted basis of this property

deduction.

both the numerator (foreign source taxable

(which, for these purposes, is the adjusted

2. Complete lines 2a through 6 of Form

income) and the denominator (worldwide

basis of the property for AMT purposes as of

4626.

taxable income) of the limitation fraction by

the close of the last tax year beginning before

taking into account the corporation’s AMT

3. Skip lines 7 through 17 and compute the

1990) using the straight line method over the

adjustments and tax preference items;

environmental tax on line 18 of Form 4626.

remainder of the recovery period applicable to

the property under the ADS of section 168(g).

2. Substitute line 13 of Form 4626 for the

Note: If you are completing line 18 for a

In doing so, use the convention that would

“total U.S. income tax against which the

member of a controlled group of corporations,

have applied to the property under section

credit is allowed”;

all members of the controlled group are

168(d). For more information (including an

limited to one $2-million exemption, which

3. For each separate limitation, multiply the

example that illustrates the application of

must be divided equally among the members

fraction in 1 above by the amount in 2 above

these rules), see Regulations section

(unless all of the members consent to an

to determine the recomputed limitation;

1.56(g)-1(b)(2).

unequal allocation). See section 1561 for

4. For each separate limitation, take the

additional information.

Line 2b(iii). Property placed in service in a

smaller of the total foreign taxes paid with

tax year beginning before 1990 to which

Then compute the AMT as follows:

respect to that separate limitation and the

the original accelerated cost recovery

recomputed limitation from 3 above; and

Complete line 1 of Form 4626 taking into

system (ACRS) applies (i.e., generally

account any deduction the corporation is

5. Add the credits you recomputed for each

property placed in service in tax years

allowed for the environmental tax. Then

separate limitation and enter the result on line

beginning after 1980 and before 1987).—

complete lines 2a through 17 of Form 4626.

14.

Depreciate the adjusted basis of this property

Note: For purposes of determining whether

ACE Worksheet Instructions

(which, for these purposes, is the adjusted

any income is “high-taxed” in applying the

basis of the property for regular tax purposes

If you are completing this worksheet for an

separate income category limitations for the

as of the close of the last tax year beginning

affiliated group that has filed a consolidated

AMT foreign tax credit, use the AMT rate

before 1990) using the straight line method

tax return for the current tax year under the

instead of the regular rate.

over the remainder of the recovery period

rules of section 1501, you must determine

applicable to the property under the ADS of

The AMT foreign tax credit is subject to a

ACE on a consolidated basis.

section 168(g). In doing so, use the

90% limit (i.e., the credit cannot be more than

Treatment of certain ownership changes.—

convention that would have applied to the

the amount on line 13 minus 10% of the

If a corporation with a net unrealized built-in

property under section 168(d) (without regard

amount that would be on that line if Form

loss (within the meaning of section 382(h))

to section 168(d)(3)). For more information

4626 were recomputed using zero on lines 7

undergoes an ownership change (within the

(including an example that illustrates the

and 8). The 90% limit does not apply to

meaning of Regulations section

application of these rules), see Regulations

certain corporations that meet the

1.56(g)-1(k)(2)), adjust the adjusted basis of

section 1.56(g)-1(b)(3).

requirements of section 59(a)(2)(C).

each asset of the corporation (immediately

Line 2b(iv). Property described in sections

Note: With respect to any separate limitation,

after the ownership change). The new

168(f)(1) through (4).—Use the depreciation

any AMT foreign tax credit the corporation

adjusted basis of each asset is its

expense claimed for regular tax purposes,

cannot claim (because of the limitation

proportionate share (based on respective fair

regardless of when the property was placed

fraction or the 90% limit discussed above)

market values) of the fair market value of the

in service.

may be carried back or carried over in

corporation’s assets (determined under

accordance with the rules outlined in section

Note: Line 2b(iv) takes priority over lines 2b(i),

section 382(h)) immediately before the

904(c). However, foreign taxes paid or

2b(ii), and 2b(iii) (i.e., for property that is

ownership change.

accrued in a tax year beginning after 1986

described in sections 168(f)(1) through (4), use

To determine if the corporation has a net

that were carried back (for regular tax

line 2b(iv) instead of the line (2b(i), 2b(ii), or

unrealized built-in loss, use the aggregate

purposes) to offset tax in a tax year beginning

2b(iii)) that would otherwise apply).

before 1987 may not be used in computing

Page 5

Instructions For Form 4626 - Alternative Minimum Tax - Corporations - 1992 Page 5

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