Instructions For Form 4626 - 2003 (Page 3 of 11) in pdf

Property placed in service before

company for which the company did not

Line 2b—Amortization of

1999. Refigure depreciation for the

elect the optional 3-year write-off under

Certified Pollution Control

AMT using ADS, with the same

section 59(e) for the regular tax.

Facilities

convention used for the regular tax.

For the regular tax, circulation

See the table below for the method and

For facilities placed in service before

expenditures may be deducted in full

recovery period to use.

1999, figure the amortization deduction

when paid or incurred. For the AMT,

for the AMT using ADS (i.e., the

these expenditures must be capitalized

straight line method over the facility’s

Property Placed in Service

and amortized over 3 years.

class life). For facilities placed in

Before 1999

If the corporation had a loss on

service after 1998, figure the

property for which circulation

amortization deduction for the AMT

IF the property is

THEN use the . . .

expenditures have not been fully

under MACRS using the straight line

amortized for the AMT, the AMT

Section 1250

Straight line method

method. Figure the AMT deduction

deduction is the smaller of (a) the loss

property.

over 40 years.

using 100% of the asset’s amortizable

allowable for the expenditures had they

basis. Do not reduce the corporation’s

Tangible property

Straight line method

remained capitalized or (b) the

AMT basis by the 20% section 291

(other than section

over the property’s

remaining expenditures to be amortized

adjustment that applied for the regular

1250 property)

AMT class life.

for the AMT.

tax.

depreciated using

Subtract the AMT deduction from the

straight line for the

Enter the difference between the

regular tax deduction. Enter the result

regular tax.

AMT deduction and the regular tax

on line 2d. If the AMT deduction is

deduction on line 2b. If the AMT

Any other tangible

150% declining

more than the regular tax deduction,

deduction is more than the regular tax

property.

balance method,

enter the difference as a negative

deduction, enter the difference as a

switching to straight

amount.

negative amount.

line the first tax year

it gives a larger

Line 2e—Adjusted Gain or

Line 2c—Amortization of

deduction, over the

Loss

Mining Exploration and

property’s AMT

class life.

If, during the tax year, the corporation

Development Costs

disposed of property for which it is

Note: This adjustment applies only to

making (or previously made) any of the

costs for which the corporation did not

How is the AMT class life

adjustments described on lines 2a

elect the optional 10-year write-off

determined? For property placed in

through 2d above, refigure the

under section 59(e) for the regular tax.

service before 1999, the class life used

property’s adjusted basis for the AMT.

for the AMT is not necessarily the same

For the AMT, the regular tax

Then refigure the gain or loss on the

as the recovery period used for the

deductions under sections 616(a) and

disposition.

regular tax.

617(a) are not allowed. Instead,

The property’s adjusted basis for the

capitalize these costs and amortize

AMT is its cost minus all applicable

The class lives are listed in Rev.

them ratably over a 10-year period

depreciation or amortization deductions

Proc. 87-56, 1987-2 C.B. 674, and in

beginning with the tax year in which the

allowed for the AMT during the current

Pub. 946, How To Depreciate Property.

corporation paid or incurred them. The

tax year and previous tax years.

10-year amortization applies to 100% of

Subtract this AMT basis from the sales

See Pub. 946 for tables that

the mining development and

price to get the AMT gain or loss.

may be used to figure AMT

TIP

exploration costs paid or incurred

Important: The corporation may also

depreciation. Rev. Proc.

during the tax year. Do not reduce the

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

89-15, 1989-1 C.B. 816, has

corporation’s AMT basis by the 30%

and 2k that must be considered on line

special rules for short tax years and for

section 291 adjustment that applied for

2e. For example, if for the regular tax

property disposed of before the end of

the regular tax.

the corporation reports a loss from the

the recovery period.

If the corporation had a loss on

disposition of an asset used in a

property for which mining exploration

passive activity, include the loss in the

How Is the Line 2a Adjustment

and development costs have not been

computations for line 2j to determine if

Figured?

fully amortized for the AMT, the AMT

any passive activity loss is limited for

Subtract the AMT deduction for

deduction is the smaller of (a) the loss

the AMT. Then, include the AMT

depreciation from the regular tax

allowable for the costs had they

passive activity loss allowed that relates

deduction and enter the result. If the

remained capitalized or (b) the

to the disposition of the asset on line 2e

AMT deduction is more than the regular

remaining costs to be amortized for the

in determining the corporation’s AMT

tax deduction, enter the difference as a

AMT.

basis adjustment. It may be helpful to

negative amount.

Subtract the AMT deduction from the

refigure the following for the AMT: Form

regular tax deduction. Enter the result

8810 and related worksheets, Schedule

In addition to the AMT adjustment to

on line 2c. If the AMT deduction is more

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

the deduction for depreciation, also

than the regular tax deduction, enter

or Form 4797.

adjust the amount of depreciation that

the difference as a negative amount.

was capitalized, if any, to account for

Enter the difference between the

the difference between the rules for the

regular tax gain or loss and the AMT

Line 2d—Amortization of

regular tax and the AMT. Include on

gain or loss. Enter the difference as a

Circulation Expenditures

this line the current year adjustment to

negative amount if:

•

taxable income, if any, resulting from

Note: This adjustment applies only to

The AMT gain is less than the regular

the difference.

expenditures of a personal holding

tax gain,

-3-

Instructions For Form 4626 - 2003 Page 3

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