Instructions For Form 4626 - 2003 (Page 8 of 11) in pdf

categories (including the general

the property under section 168(d). For

ACE Worksheet

limitation income category). Any AMT

more information (including an example

foreign tax credit for each separate

that illustrates the application of these

Instructions

limitation category that the corporation

rules), see Regulations section

cannot claim (because of the limitation

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

Treatment of Certain

fraction and/or the 90% limit) is treated

Line 2b(4). For property placed in

as a credit carryback or carryforward for

Ownership Changes

service in a tax year that began after

that limitation category under section

1980 and before 1987 (to which the

If a corporation with a net unrealized

904(c). (Because these amounts may

original ACRS applies), use the straight

built-in loss (within the meaning of

differ from the amounts that are carried

line method over the remainder of the

section 382(h)) undergoes an

back or forward for the regular tax,

recovery period for the property under

ownership change (within the meaning

keep adequate records for both the

ADS. In doing so, use the convention

of Regulations section 1.56(g)-1(k)(2)),

AMT and regular tax.) When carried

that would have applied to the property

refigure the adjusted basis of each

back or forward, the credit is reported

under section 168(d) (without regard to

asset of the corporation (immediately

on Schedule B, Part II, line 4, of the

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

after the ownership change). The new

carryover year’s AMT Form 1118 for

information (including an example that

adjusted basis of each asset is its

that separate limitation category.

illustrates the application of these

proportionate share (based on

rules), see Regulations section

Simplified Limitation

respective fair market values) of the fair

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

market value of the corporation’s assets

Election

(determined under section 382(h))

Line 2b(5). For property described in

The corporation may elect to use a

immediately before the ownership

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

simplified section 904 limitation to figure

change.

regular tax depreciation, regardless of

its AMTFTC. The corporation must

when the property was placed in

To determine if the corporation has a

make the election for its first tax year

service.

net unrealized built-in loss, use the

beginning after 1997 for which it claims

aggregate adjusted basis of its assets

an AMTFTC. If it does not make the

Important: Line 2b(5) takes priority

used for figuring its ACE.

election for that tax year, it may not

over lines 2b(1), 2b(2), 2b(3), and 2b(4)

make the election for a later tax year.

Note: Use these new adjusted bases

(i.e., for property that is described in

for all future ACE calculations (such as

Once made, the election applies to all

sections 168(f)(1) through (4), use line

later tax years and may only be

depreciation and gain or loss on

2b(5) instead of the line 2b(1), 2b(2),

revoked with IRS consent.

disposition of an asset).

2b(3), or 2b(4) that would otherwise

apply).

If the corporation made the election

Line 2—ACE Depreciation

for each of its AMT separate limitations,

Line 2b(6). Use the regular tax

Adjustment

the corporation uses its separate

depreciation for (a) property placed in

limitation income or loss that it

Line 2a. Generally, the amount

service before 1981 and (b) property

determined for the regular tax (instead

entered on this line is the depreciation

placed in service after 1980, in a tax

of refiguring the separate limitation

the corporation claimed for the regular

year that began before 1990, that is

income or loss for the AMT, as

tax (Form 4562, line 22), modified by

excluded from MACRS by section

described earlier).

the AMT depreciation adjustments

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

reported on lines 2a and 2o of Form

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

Line 13

4626.

the Tax Reform Act of 1986.

Line 2b(1). For property placed in

Enter the corporation’s regular tax

Line 2c. Subtract line 2b(7) from line

service after 1993, the ACE

liability (as defined in section 26(b))

2a and enter the result on line 2c. If line

depreciation is the same as the AMT

minus any foreign tax credit and

2b(7) exceeds line 2a, enter the

depreciation. Therefore, enter on line

possessions tax credit (e.g., for Form

difference as a negative amount.

2b(1) the same depreciation expense

1120: Schedule J, line 3, minus the

Line 3—Inclusion in ACE of

you included on line 2a of this

sum of Schedule J, lines 6a and 6b).

worksheet for such property.

Do not include any:

Items Included in Earnings and

•

Tax on accumulation distribution of

Profits (E&P)

Line 2b(2). For property placed in

trusts from Form 4970,

service in a tax year that began after

In general, any income item that is not

•

Recapture of investment credit

1989 and before 1994, use the ADS

taken into account (see below) in

(under section 49(b) or 50(a)) from

depreciation described in section

determining the corporation’s

Form 4255,

168(g). However, for property (a)

pre-adjustment AMTI but that is taken

•

Recapture of low-income housing

placed in service in a tax year that

into account in determining its E&P

credit (under section 42(j) or (k)) from

began after 1989 and (b) described in

must be included in ACE. Any such

Form 8611, or

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

income item may be reduced by all

•

Recapture of any other credit.

same depreciation claimed for the

items related to that income item and

regular tax and enter it on line 2b(5).

that would be deductible when figuring

Line 2b(3). For property placed in

pre-adjustment AMTI if the income

service in a tax year that began after

items to which they relate were

1986 and before 1990 (MACRS

included in the corporation’s

property), use the straight line method

pre-adjustment AMTI for the tax year.

over the remainder of the recovery

Examples of adjustments for these

period for the property under the ADS

income items include:

•

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

Interest income from tax-exempt

convention that would have applied to

obligations excluded under section 103

-8-

Instructions For Form 4626 - 2003 Page 8

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