Instructions For Schedule P (Form 541) - 2016 (Page 4 of 7) in pdf

or incurred. Enter the difference between the AMT mining amortization

Step 3 – Figure the difference between the refigured gain or loss for

and the regular tax mining deduction. If the AMT mining amortization is

AMT and the gain or loss reported for regular tax. Enter the result on

more than the regular tax mining deduction, enter the adjustment as a

line 4k. Enter the difference as a negative if any of the following apply:

negative amount.

• The AMT gain is less than the regular tax gain.

See IRC Section 56(a)(2)(B) for special rules that apply to losses related

• The AMT loss is more than the regular tax loss.

to mining property.

• You have an AMT loss and a regular tax gain.

Line 4h – Long-term contracts entered into after February 28, 1986

Incentive stock options (ISOs). For regular tax, no income is recognized

For AMT, the percentage-of-completion method of accounting described

when an ISO, as defined in IRC Section 422(b), is granted or exercised.

in IRC Section 460(b) generally must be used. This rule does not apply

However, this rule does not apply for AMT for ISOs exercised after

to home construction contracts, as defined in IRC Section 460(e)(6).

December 31, 1987. Instead, the estate or trust must include the excess,

if any, of:

To figure the AMT adjustment, subtract the amount computed using the

percentage-of-completion method for AMT from the amount allowed for

• The fair market value (FMV) of the option (determined without regard

regular tax. If the amount for AMT is less than the amount computed for

to any lapse restriction) at the first time the rights in the option

regular tax, enter the difference as a negative amount.

become transferable or when these rights are no longer subject to a

substantial risk of forfeiture, over

Line 4i – Amortization of pollution control facilities placed in service

• The amount the estate or trust paid for the option.

after 1986

For regular tax, the estate or trust may elect to amortize the basis of a

Increase the AMT basis of any stock acquired through the exercise of an

certified pollution control facility over 60 months.

ISO by the amount of the adjustment. Do not make an AMT adjustment

if the estate or trust exercised an ISO and disposed of that stock in the

For facilities placed in service before 1999, the AMT deduction is

same year.

figured using the alternative depreciation system (ADS) described in

IRC Section 168(g). Use the federal Class Life Asset Depreciation Range

Line 4l – Certain loss limitations

If you include adjustments or preferences on this line, do not include

System (ADR) under the straight-line method.

them on any other line of this schedule. If the loss is from a passive

For facilities placed in service after 1998, the AMT deduction is figured

activity, use line 4n instead. If the loss is from a tax shelter farm activity

under the modified accelerated cost recovery system (MACRS) using the

(that is not passive), use line 4m.

straight-line method.

For AMT, refigure certain limited losses using the AMT adjustments and

To figure the AMT adjustment on line 4i, subtract the amount figured

tax preferences. Refigure the gains and losses from activities for which

for AMT from the amount allowed for regular tax. If the AMT pollution

the estate or trust is not at risk. Also, refigure the basis limitations that

control facilities depreciation is more than the regular tax pollution

apply to S corporations and partnerships. See IRC Sections 59(h), 465,

control facilities amortization, enter the difference as a negative amount.

704(d), and 1366(d).

Line 4j – Installment sales of certain property

Enter on this line the difference between AMT limited losses (from

If, for regular tax purposes, the estate or trust used the installment

activities reported on federal Schedules C (Form 1040), C-EZ

method to report any non-dealer disposition of property that occurred

(Form 1040), E (Form 1040), F (Form 1040) or federal Form 4835,

after August 16, 1986, but before the first day of your taxable year that

Farm Rental Income and Expenses), and the regular tax limited losses

began in 1990, and if the obligation that arose from the disposition was

from these activities. If the AMT limited loss is less than the regular tax

an installment obligation to which the proportionate disallowance rule

limited loss, enter the difference as a negative amount.

applied, you must refigure your income for AMT without regard to the

Line 4m – Tax shelter farm activities

installment method.

If you include AMT adjustments or tax preferences on this line, do not

Enter the difference between your AMT and regular tax income on this

include them on any other line of this schedule.

line. If the AMT income is smaller, enter the difference as a negative

Complete this line only if the estate or trust has a gain or loss from a

amount.

tax shelter farm activity, as defined in IRC Section 58(a)(2), that is not a

California conforms to the repeal of the installment method alternative

passive activity. If the tax shelter farm activity is a passive activity, you

minimum tax adjustment for farmers for payments received in taxable

must include it with other passive activities on line 4n.

years beginning on or after January 1, 1997, for installment sales made

Refigure all gains and losses reported for regular tax from tax shelter

in income years beginning after December 31, 1987.

farm activities using the AMT adjustments and preferences.

Line 4k – Adjusted gain or loss (including incentive stock options)

Figure the tax shelter farm activity gain or loss for AMT using the same

The estate or trust will have an entry on this line only if it reported a

rules used for regular tax except for the following:

gain or loss from the sale or exchange of business or income-producing

property on Schedule D (541), Capital Gain and Loss, Schedule D-1 or

• Do not take any recomputed loss unless the estate or trust is

federal Form 4684, Casualties and Thefts.

insolvent, see IRC Section 58(c)(1).

• Do not offset gains from other tax shelter farm activities with the

Generally, if the estate or trust reported a gain or loss from the sale or

recomputed loss.

exchange of mutual funds, stocks, or bonds, there will not be an entry

on this line.

Suspend and carry over the loss to future taxable years until one of the

following applies:

Figure the AMT adjustment for this line as follows:

• There is a gain in a future taxable year from that same activity.

Step 1 – Refigure the adjusted basis of the asset sold by taking into

• The activity is disposed of.

account any AMT adjustments you made this year or in previous years

for depreciation (see line 4e), circulation and research and experimental

Enter on this line the difference between the tax shelter farm loss for

expenditures (see line 4f), mining cost (see line 4g), pollution control

AMT and regular tax.

facilities (see line 4i), and incentive stock options (see line 4k).

Line 4n – Passive activities

If you include AMT adjustments or preferences on this line, do not

Step 2 – Refigure your gain or loss using the adjusted basis figured in

include them on any other line of this schedule.

Step 1.

The estate or trust may want to complete a second form FTB 3801,

Passive Activity Loss Limitations, and the other forms or schedules on

which passive activities are reported to figure this adjustment.

Several types of adjustments may be entered on this line.

Page 4 Schedule P (541) Instructions 2016

Instructions For Schedule P (Form 541) - 2016 Page 4

Related Articles

Related forms

Related Categories