Instructions For Form 4626 - Alternative Minimum Tax - Corporations

Line 2b(v). Other property (i.e., generally

but only to the extent the dividend is

recomputed for AMT purposes), enter the

property placed in service before 1981

attributable to income of the paying

result as a negative amount.

AND property placed in service after 1980,

corporation that is subject to Federal income

Line 5c. Organizational expenditures.—For

in a tax year beginning before 1990, that is

tax. Also see sections 56(g)(4)(C)(iii) and (iv)

purposes of computing ACE, the amortization

excluded from the application of MACRS

for special rules for dividends from section

provisions of section 248 do not apply to

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

936 companies and certain dividends

amounts paid or incurred in tax years

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

received by certain cooperatives.

beginning after 1989. Therefore, for ACE

Tax Reform Act of 1986).—Use the

An item is considered “taken into account”

purposes, all organizational expenditures are

depreciation expense claimed for regular tax

without regard to the timing of its deductibility

charged to a capital account and are not

purposes.

in computing pre-adjustment AMTI or E&P.

taken into account until the corporation is

Line 2c. ACE depreciation adjustment.—

Therefore, only deduction items that are

sold or otherwise disposed of.

Subtract line 2b(vi) from line 2a and enter the

“permanently disallowed” in computing E&P

Enter on line 5c all amortization deductions

result on line 2c. If line 2b(vi) exceeds line 2a,

are disallowed in computing ACE.

for organizational expenditures taken for

enter the difference as a negative amount.

Items described in Regulations section

regular tax purposes during the tax year.

1.56(g)-1(e) for which no adjustment is

Line 5d. LIFO inventory adjustments.—The

Inclusion In ACE of Items Included In

necessary.—Generally, no deduction is

adjustments provided in section 312(n)(4)

Earnings and Profits (E&P)

allowed for an item in computing ACE if the

apply in computing ACE.

item is not deductible in computing

Lines 3a through 3f

Line 5e. Installment sales.—For any

pre-adjustment AMTI (even if the item is

In general, any income item that is not “taken

installment sale in a tax year beginning after

deductible in computing E&P). The only

into account” (defined below) in determining

1989, the corporation generally cannot use

exceptions to this general rule are the related

the corporation’s pre-adjustment AMTI but

the installment method in computing ACE.

reductions to an income item described in the

that is “taken into account” in determining its

However, it may use the installment method

second sentence of the instructions for lines

E&P must be included in determining ACE.

with respect to the applicable percentage (as

3a through 3f above. Deductions that are not

Any such income item may be reduced by all

determined under section 453A) of the gain

allowed in computing ACE include:

items that relate to that income item and that

from any installment sale to which section

Capital losses in excess of capital gains;

would be deductible in computing your

453A(a)(1) applies.

pre-adjustment AMTI if the income items to

Bribes, fines, and penalties disallowed

Subtract the installment sale income

which they relate were included in the

under section 162;

reported for AMT purposes from the

corporation’s pre-adjustment AMTI for the tax

Charitable contributions in excess of the

recomputed ACE income from the sales and

year. Examples of adjustments for these

limitations of section 170;

enter the result on line 5e. If the recomputed

income items include: (i) interest income from

ACE income from the sales is less than the

Meals and entertainment expenses in

tax-exempt obligations excluded under

amount reported for AMT purposes, enter the

excess of the limitations of section 274;

section 103 minus any costs incurred in

difference as a negative amount.

Federal taxes disallowed under section

carrying these tax-exempt obligations; and

Line 6. Disallowance of loss on exchange

275; and

(ii) proceeds of life insurance contracts

of debt pools.—For purposes of computing

excluded under section 101 minus the basis

Golden parachute payments in excess of

ACE, the corporation may not recognize any

in the contract for purposes of ACE.

the limitation of section 280G.

loss on the exchange of any pool of debt

Note: Do not make an adjustment for any

Note: No adjustment is necessary for these

obligations for another pool of debt

income from discharge of indebtedness

items since they were not allowed in

obligations having substantially the same

excluded from gross income under section

computing pre-adjustment AMTI.

effective interest rates and maturities. Add

108 or any corresponding provision of prior

back (i.e., enter as a positive adjustment) on

Line 5a. Intangible drilling costs.—For

law.

line 6 any such loss to the extent recognized

purposes of computing ACE, determine the

An income item is considered “taken into

for regular tax purposes.

deduction for intangible drilling costs (as

account” without regard to the timing of its

defined in section 263(c)) in the manner

Line 7. Acquisition expenses of life

inclusion in a corporation’s pre-adjustment

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

insurance companies for qualified foreign

AMTI or its E&P. Only income items that are

contracts.—For purposes of computing ACE,

Subtract the recomputed ACE expense (if

“permanently excluded” from pre-adjustment

acquisition expenses of life insurance

any) from the expense recomputed for AMT

AMTI are included in ACE. An income item

companies for qualified foreign contracts (as

purposes (in arriving at the preference

will not be considered “taken into account”

defined in section 807(e)(4) without regard to

amount to enter on line 3d of Form 4626) and

merely because the proceeds from that item

the treatment of reinsurance contract rules of

enter the result on line 5a. If the total

might eventually be reflected in a

section 848(e)(5)) must be capitalized and

recomputed ACE expense exceeds the

corporation’s pre-adjustment AMTI (e.g., that

amortized in accordance with the treatment

amount recomputed for AMT purposes, enter

of a shareholder) on the liquidation or

generally required under generally accepted

the result as a negative amount.

disposal of a business.

accounting principles (and in such a manner

Line 5b. Circulation expenditures.—If, for

Line 3d.—Include in ACE the income on life

as if this rule applied to such contracts for all

regular tax and AMT purposes, the

insurance contracts (as determined under

applicable tax years).

corporation elected the optional 3-year

section 7702(g)) for the tax year minus the

Subtract the recomputed ACE expense (if

writeoff under section 59(e) for all of these

portion of any premium that is attributable to

any) from the expense recognized for regular

expenditures, skip this line (no adjustment is

insurance coverage.

tax purposes and enter the result on line 7. If

necessary).

the total recomputed ACE expense exceeds

Disallowance of Items Not Deductible

For purposes of computing ACE, the

the amount recognized for regular tax

in Computing E&P

amortization provisions of section 173 do not

purposes, enter the result as a negative

apply to amounts paid or incurred in tax

Lines 4a through 4f

amount.

years beginning after 1989. Therefore, for

Line 8. Depletion.—For purposes of

ACE purposes, you must treat circulation

Generally, no deduction is allowed in

computing ACE, the allowance for depletion

expenditures in accordance with the case law

computing ACE for items not “taken into

for any property placed in service in a tax

that existed before section 173 was enacted.

account” (defined below) in computing E&P

year beginning after 1989 must be

for the tax year. These amounts increase ACE

Subtract the recomputed ACE expense (if

determined under the cost depletion method

to the extent they are deductible in

any) from the expense claimed for regular tax

of section 611.

computing pre-adjustment AMTI (i.e., they

purposes (or in the case of a personal holding

would be positive adjustments). However,

Subtract the recomputed ACE expense (if

company, from the expense recomputed for

there are exceptions. Do not add back: (i) any

any) from the expense recomputed for AMT

AMT purposes in computing the adjustment

deduction allowable under section 243 or 245

purposes (in arriving at the preference

to enter on line 2d of Form 4626) and enter

for any dividend that qualifies for a 100%

amount to enter on line 3a of Form 4626) and

the result on line 5b. If the total recomputed

dividends-received deduction under section

enter the result on line 8 of the worksheet. If

ACE expense exceeds the amount claimed

243(a), 245(b), or 245(c); and (ii) any dividend

the total recomputed ACE expense exceeds

for regular tax purposes (or in the case of a

received from a “20-percent owned

personal holding company, the amount

corporation” (as defined in section 243(c)(2)),

Page 6

Instructions For Form 4626 - Alternative Minimum Tax - Corporations - 1992 Page 6

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