Instructions For Schedule P (Form 541) - 2016 Page 5

ADVERTISEMENT

Regular passive activities. Refigure the passive activity gains and
Exception. The preference for IDCs from oil and gas wells does not
losses for AMT by taking into account all AMT adjustments, preferences
apply to taxpayers who are independent producers, i.e., not integrated
and AMT prior year unallowed losses that apply to the passive activity.
oil companies as defined in IRC Section 291(b)(4). However, this
The adjustment is the difference between the AMT passive activity
benefit may be limited. First, figure the IDC preference as if this
income or loss (from activities reported on federal Schedules C
exception did not apply. Then, for purposes of this exception, complete
(Form 1040), C-EZ (Form 1040), E (Form 1040), F (Form 1040) or
Schedule P (541) through line 6, including the IDC preference. If the
federal Form 4835) and the regular tax passive activity income or loss
amount of the IDC preference exceeds 40% of the amount figured
from these activities.
for line 6, enter the excess on line 4q (the benefit of this exception is
limited). If the amount of the IDC preference is equal to or less than 40%
Publicly traded partnership (PTP). If the estate or trust had a loss from
of the amount figured for line 6, do not enter an amount on line 4q (the
a PTP, it will have to refigure the loss using any AMT adjustments, tax
benefit of this exception is not limited).
preferences, and any AMT prior year unallowed loss.
Line 4r – California qualified stock options
Tax shelter passive farm activities. Refigure any gain or loss from a tax
Include the amount of compensation excluded from the employee’s
shelter passive farm activity. Take into account all AMT adjustments, tax
gross income for regular tax from the exercise of California qualified
preferences, and AMT prior year unallowed losses. Do not include a tax
stock options (CQSOs). This amount is the difference between the FMV
shelter passive farm activity loss on your AMT form FTB 3801. Instead,
of the corporation’s stock on the date the option is exercised and the
carry the loss forward to offset against future tax shelter passive farm
amount the employee paid for the stock.
activities.
Line 4s – Other adjustments
Insolvency. If, at the end of the taxable year, the liabilities of the
Include on this line:
estate or trust exceed the FMV of its assets, increase the passive
activity loss allowed by the excess (but not more than the total loss).
• Patron’s adjustment. Distributions the estate or trust received from a
See IRC Section 58(c)(1).
cooperative may be includible in income. Unless the distributions are
nontaxable, include on line 4s the total AMT patronage dividend and
Line 4o – Beneficiaries of other trusts or decedent’s estates
per-unit retain allocation adjustment reported to the estate or trust by
If the estate or trust is a beneficiary of another estate or trust, enter
the cooperative.
on this line the amount from Schedule K-1 (541), line 12a. This is the
• Related adjustments. AMT adjustments and tax preferences may
estate’s or trust’s share of the distributable AMTI from the other estate
affect deductions that are based on an income limit other than AGI
or trust.
or modified AGI (e.g., farm conservation expenses). Refigure these
Line 4p – Depletion
deductions using the income limit as modified for AMT. Include the
For AMT, if the depletion deduction for mines, wells, and other natural
difference between the regular tax and AMT deduction on line 4r. If
deposits determined under IRC Section 611 exceeds the adjusted basis
the AMT deduction is more than the regular tax deduction, include
of the property at the end of the taxable year, the estate or trust will have
the difference as a negative amount.
a depletion adjustment. To figure the adjusted basis, use the rules in
Do not make an adjustment on line 4s for an item you refigured on
IRC Section 1016 but do not reduce the adjusted basis by current-year
another line of Schedule P (541).
depletion. Figure the excess amount separately for each property. Enter
on this line only the depletion amount that exceeds the adjusted basis.
Line 7a – Alternative minimum tax NOL deduction
Get the instructions to federal Schedule I (Form 1041), line 6 for more
For loss years beginning after 1986, reduce any NOL by any
information.
positive AMT adjustments in that year. Increase the NOL by negative
adjustments. Also, reduce the NOL by any tax preferences, but only to
California conforms to the federal repeal of the AMT depletion
the extent they increase the NOL figured for regular tax.
adjustment for independent oil and gas producers and royalty owners.
For more information, get federal Form 6251, Alternative Minimum
Line 7b – AMTI Exclusion
Tax – Individuals, and instructions. However, your California depletion
Qualified taxpayers shall exclude income from any trade or business
costs may continue to be different from the federal amounts because of
when figuring AMTI. If you are a qualified taxpayer (see General
prior differences in law and different basis.
Information G, Alternative Minimum Taxable Income (AMTI) Exclusion),
enter your taxable trade or business income on line 7b. If zero or less,
Line 4q – Intangible drilling costs
enter -0-.
If the estate or trust elected the optional 60-month write-off under
IRC Section 59(e) for all property in this category, skip this line.
Part II – Income Distribution Deduction on an Alternative
For AMT, intangible drilling costs (IDCs) from oil, gas, and geothermal
Minimum (AMT) Tax Basis
wells are preferences if the excess IDCs exceed 65% of the net income
Line 5 – Enter any capital gains that were paid or permanently set aside
from the wells. Figure the preference for oil and gas properties separate
for charitable purposes from the current year’s income included on
from geothermal properties. To figure excess IDCs:
Form 541, Schedule A, Charitable Deduction, line 1c.
A. Figure the amount of the IDCs allowed for regular tax under IRC
Line 6 and Line 7 – Capital gains and losses must take into account any
Section 263(c). Do not include any deduction for nonproductive
basis adjustments from Part I, line 4k.
wells. Refigure the IDCs allowed for AMT by amortizing them
over 120 months, starting with the month the well was placed in
Line 15 – Income distribution deduction on an AMT basis
production. Then subtract the AMT IDCs from the regular tax IDCs
Allocate the income distribution deduction computed on an AMT basis
to get the excess IDCs. The estate or trust may elect to use any other
among the beneficiaries in the same manner as income was allocated
method that is allowed in determining cost depletion.
for regular tax. Report each beneficiary’s share on the respective
Schedule K-1 (541), line 12a.
B. Figure net income by reducing the gross income, from all oil, gas,
and geothermal wells that was received or accrued during the taxable
Part III – Tentative Minimum Tax (TMT) and Alternative
year by any deductions allocable to these properties (reduced by the
Minimum Tax (AMT) Computation
excess IDCs). Use only income and deductions allowed for AMT.
Line 9 – Enter the total of the estate’s or trust’s regular tax from
C. Multiply the net income by 65% (.65). Subtract the result from the
Form 541, line 21a.
excess IDCs figured in Step A. This is the excess IDCs. Enter the
result on line 4q.
Schedule P (541) Instructions 2016 Page 5

ADVERTISEMENT

00 votes

Related Articles

Related forms

Related Categories

Parent category: Financial
Go
Page of 7