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A Purpose

G Alternative Minimum Taxable Income (AMTI)

Exclusion

California tax law gives special treatment to some items of income

and allows deductions and credits for some items of expense. Many

A qualified taxpayer must exclude income, positive and negative

individuals who benefit from these provisions must pay at least a

adjustments, and preference items attributable to any trade or business

minimum amount of tax and/or limit the amount of their credits.

when figuring AMTI. These adjustments and preference items must also

Use Schedule P (540), Alternative Minimum Tax and Credit

be excluded when calculating any deductions that may result in AMT

Limitations — Residents, to determine if:

carryovers. You are a qualified taxpayer if you meet both of the following:

• You owe AMT.

• Own or have an ownership interest in a trade or business.

• Your credits must be reduced or eliminated entirely. Your credits may

• Have aggregate gross receipts (less returns and allowances), during

be limited even if you do not owe AMT, so be sure to complete Side 1

the taxable year of less than $1,000,000 from all trades or businesses

and Side 2 of Schedule P (540).

for which you are the owner or have an ownership interest. Gross

receipts may include, but are not limited to, items reported on federal

B Who Must File

Schedules C, Profit or Loss from Business, D, Capital Gains and

Losses, E, Supplemental Income and Loss, (other than income from a

Complete Schedule P (540) to see if AMT applies to you. Attach it to

trust), or F, Profit or Loss from Farming, and from federal Form 4797,

Form 540 only if any one of the following apply:

Sales of Business Property (figured in accordance with California law),

• You owe AMT.

or California Schedule D-1, Sales of Business Property, (if required to

• You have certain credits (such as the credit for child adoption costs,

complete it) that are associated with a trade or business. In the case of

etc.) that are limited by tentative minimum tax (TMT) in Part II, line 24

an ownership interest, you include only the proportional share of gross

(or in some cases by AMT, line 26).

receipts of any trade or business from a partnership, S corporation,

• The total of Part I, line 7 through line 13 is negative and you would be

regulated investment company (RIC), a real estate investment trust

liable for AMT without taking those lines into account.

(REIT), or real estate mortgage investment conduit (REMIC) in

• Schedule P (540), Part I, line 21, Alternative Minimum Taxable Income,

accordance with your ownership interest in the enterprise. Apply the

(AMTI), is more than Part II, line 22, Exemption Amount, and you have

$1,000,000 test to the return regardless of filing status. The threshold

one or more adjustments on Part I, line 4 or line 7 through line 13l.

does not become $2,000,000 for married /RDP taxpayers filing jointly.

C Record Keeping

Aggregate gross receipts (less returns and allowances) means the sum

of the gross receipts of the trades or businesses which you own and the

For AMT, certain items of income, deductions, etc., receive different tax

proportionate interest of the gross receipts of the trades or businesses

treatment than for regular tax. Therefore, you need to refigure items for

which you own and of pass-through entities in which you hold an interest.

AMT that you figured for regular tax. In some cases, you may wish to

Gross receipts, less returns and allowances means the sum of the

do this by completing the applicable tax form a second time. If you do

gross receipts from the production of business income, as defined in

complete another form, do not attach it to your tax return, but keep it for

R&TC Section 25120(a), and the gross receipts from the production of

your records.

nonbusiness income, as defined in R&TC Section 25120(d).

For regular tax, some deductions may result in carryovers to future

Proportionate interest means:

taxable years. Examples are investment interest expense, net operating

loss, and capital loss. Because you may have to refigure these items for

1. In the case of a pass-through entity which reports a profit for the

AMT, the carryover amount may be different for AMT than for regular

taxable year, your profit interest in the entity at the end of your taxable

tax. Although the carryovers that you figure for AMT do not affect the

year.

carryovers for regular tax, you must keep track of your AMT carryovers in

2. In the case of a pass-through entity which reports a loss for the taxable

order to complete your Schedule P (540) in future years.

year, your loss interest in the entity at the end of your taxable year.

3. In the case of a pass-through entity which is sold or liquidates during

D Partnerships, S Corporations, Limited Liability

the taxable year, your capital account interest in the entity at the time

Companies (LLCs), Estates, or Trusts

of the sale or liquidation.

If you are a partner in a partnership, a shareholder of an S corporation,

Proportionate interest includes an interest in a pass-through entity

or a member of an LLC, you must include your distributive share of

including a partnership, S corporation, RIC, REIT, or REMIC.

adjustments and tax preference items shown on your Schedule K-1

If you are a qualified taxpayer both of the following applies:

(565), for partners; Schedule K-1 (100S), for shareholders; or

• In Part I, do not include any positive or negative adjustments or

Schedule K-1 (568), for members. If you are a beneficiary of an

preference items attributable to any trade or business.

estate or trust, you must include the AMT adjustment shown on your

• In Part I, line 17, enter all taxable income attributable to any trade or

Schedule K-1 (541).

business.

E Credit for Prior Year Alternative Minimum Tax

Specific Line Instructions

If you paid AMT in a prior year, you may be able to claim the credit for

Registered Domestic Partners

prior year AMT. Get form FTB 3510, Credit for Prior Year Alternative

RDPs compute their AMT using the same rules applicable to a married

Minimum Tax — Individuals or Fiduciaries, to see if you qualify.

person. RDPs base their California AMT on the pro forma federal return.

The prior year alternative minimum tax (AMT) credit must be applied

For more information on RDPs, get FTB Pub. 737, Tax Information for

before any credits that can reduce regular tax below the tentative

Registered Domestic Partners.

minimum tax (TMT.)

Part I Alternative Minimum Taxable Income

F Additional Information

If you are a military servicemember domiciled outside of California,

For more information, get federal Form 6251, Alternative Minimum

subtract your military pay from your federal adjusted gross income.

Tax — Individuals.

If you itemized your deductions for California regular tax only and not for

federal tax, use the amounts from the federal Schedule A (Form 1040),

Itemized Deductions, that you completed using California figures when

these instructions refer to Schedule A.

Page 2 Schedule P (540) Instructions 2013

Instructions For Schedule P (540) - Alternative Minimum Tax And Credit Limitations - Residents - 2013 Page 2

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