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2008 Department of the Treasury
Internal Revenue Service
Instructions for Form 4626
(Rev. March 2009)
Alternative Minimum Tax—Corporations
Section references are to the Internal Generally, file Form 4626 if either of corporation exempt from the AMT for its
Revenue Code unless otherwise noted. the following apply. previous tax year, but does not meet
• The corporation’s taxable income or the gross receipts test for its tax year
(loss) before the net operating loss beginning in 2008, it loses its AMT
What’s New (NOL) deduction plus its adjustments
and preferences total more than
exemption status. Special rules apply in
figuring AMT for the tax year beginning
• This March 2009 revision of the 2008 $40,000 or, if smaller, its allowable in 2008 and all later years based on the
Instructions for Form 4626 reflects exemption amount. “change date.” The change date is the
changes made by the American • The corporation claims any general first day of the corporation’s tax year
Recovery and Reinvestment Tax Act of business credit, any qualified electric beginning in 2008 (the first tax year for
2009 and affects fiscal tax years ending vehicle credit, or the credit for prior year which the corporation ceased to be a
in 2009. minimum tax. small corporation). Where this applies,
• Interest on private activity bonds complete Form 4626 taking into
issued after December 31, 2008, and Exemption for Small account the following modifications.
before January 1, 2011, is not a tax
Corporations • The adjustments for depreciation and
preference item. In addition, there is no amortization of pollution control facilities
adjustment to adjusted current earnings A corporation is treated as a small
corporation exempt from the AMT for its apply only to property placed in service
(ACE) for such interest. See the on or after the change date.
instructions for line 2m on page 5 and current tax year beginning in 2008 if:
the instructions for line 3 of the ACE 1. The current year is the
• The adjustment for mining
Worksheet on page 9. exploration and development costs
corporation’s first tax year in existence
• For tax years ending after May 22, applies only to amounts paid or
(regardless of its gross receipts for the
2008, and tax years beginning before incurred on or after the change date.
year), or
May 23, 2009, if a corporation has both 2. Both of the following apply. • The adjustment for long-term
a net capital gain and a qualified timber contracts applies only to contracts
a. It was treated as a small entered into on or after the change
gain, for purposes of the alternative corporation exempt from the AMT for all
minimum tax, a maximum 15% tax may date.
prior tax years beginning after 1997.
apply to the qualified timber gain. Use b. Its average annual gross receipts • When figuring the amount to enter on
new Part II to figure the corporation’s for the 3-tax-year period (or portion line 6, for any loss year beginning
alternative tax. See the instructions for thereof during which the corporation before the change date, use the
Part II. was in existence) ending before its tax corporation’s regular tax NOL for that
• The 90% limit on the alternative tax year beginning in 2008 did not exceed year.
net operating loss deduction (ATNOLD) $7.5 million ($5 million if the corporation • Figure the limitation on line 4d only
does not apply to the portion of the had only 1 prior tax year). for prior tax years beginning on or after
ATNOLD attributable to certain qualified the change date.
disaster losses. See the instructions for The following rules apply when • Enter zero on line 2c of the Adjusted
line 6 on page 7. figuring gross receipts under 2b above. Current Earnings (ACE) Worksheet on
• Gross receipts must be figured using page 11. When completing line 5 of the
General Instructions the corporation’s tax accounting ACE Worksheet, take into account only
amounts from tax years beginning on or
method and include total sales (net of
returns and allowances), amounts after the change date. Also, for line 8 of
Purpose of Form received for services, and income from the ACE Worksheet, take into account
Use Form 4626 to figure the alternative investments and other sources. See only property placed in service on or
minimum tax (AMT) under section 55 Temporary Regulations section after the change date.
for a corporation that is not exempt 1.448-1T(f)(2)(iv) for more details.
Note. No additional modification in
from the AMT. • Gross receipts include those of any figuring AMT is required for exceptions
Consolidated returns. For an predecessor of the corporation,
related to any item acquired in a
affiliated group filing a consolidated including non-corporate entities.
corporate acquisition under section 381
return under the rules of section 1501, • For a short tax year, gross receipts or to any substituted basis property, if
AMT must be figured on a consolidated must be annualized by multiplying them
any of the AMT adjustment
basis. by 12 and dividing the result by the
modifications listed earlier applied to
number of months in the tax year.
the item or property while it was held by
Who Must File • The gross receipts of all persons the transferor.
treated as a single employer under
section 52(a), 52(b), 414(m), or 414(o)
If the corporation is a “small must be aggregated. Once the corporation loses its
! corporation” exempt from the
CAUTION AMT (as explained below), do Loss of small corporation status. If
! small corporation status, it
CAUTION cannot qualify for any
not file Form 4626. the corporation qualified as a small subsequent tax year.
Cat. No. 64443L
5. Complete the rest of the form in • Passive activities. Take this
Credit for Prior Year the normal manner. adjustment into account on line 2j.
Minimum Tax • An activity for which the corporation
is not at risk or income or loss from a
A corporation may be able to take a Allocating Differently partnership interest or stock in an S
minimum tax credit against the regular
tax for AMT incurred in prior years. See Treated Items Between corporation if the basis limitations
apply. Take this adjustment into
Form 8827, Credit for Prior Year Certain Entities and account on line 2k.
Minimum Tax — Corporations, for
details. Their Investors What Depreciation Must Be
For a regulated investment company, a Refigured for the AMT?
Recordkeeping real estate investment trust, or a
Generally, the corporation must refigure
common trust fund, see section 59(d)
Certain items of income, deductions, depreciation for the AMT, including
for details on allocating certain
credits, etc., receive different tax depreciation allocable to inventory
differently treated items between the
treatment for the AMT than for the costs, for the following.
entity and its investors.
regular tax. Therefore, the corporation • Property placed in service after 1998
should keep adequate records to depreciated for the regular tax using
support items refigured for the AMT. Optional Write-Off for the 200% declining balance method
Examples include: Certain Expenditures (generally 3-, 5-, 7-, or 10-year property
• Tax forms used for regular tax There is no AMT adjustment for the
under the modified accelerated cost
purposes that are completed a second recovery system (MACRS)), except for
following items if the corporation elects qualified property eligible for the special
time to refigure items of income, to deduct them ratably over the period
deductions, etc., for the AMT; depreciation allowance.
of time shown for the regular tax.
• The computation of a carryback or • Circulation expenditures (personal • Section 1250 property placed in
carryforward to other tax years of service after 1998 that is not
holding companies only) — 3 years.
depreciated for the regular tax using
certain deductions or credits (for • Mining exploration and development the straight line method.
example, net operating loss, capital costs — 10 years.
loss, and foreign tax credit) if the AMT • Intangible drilling costs — 60 months. • Tangible property placed in service
amount is different from the regular tax after 1986 and before 1999. (If the
amount; See section 59(e) for more details. transitional election was made under
• The computation of a carryforward of section 203(a)(1)(B) of the Tax Reform
a passive loss or tax shelter farm Act of 1986, this rule applies to property
activity loss if the AMT amount is
different from the regular tax amount;
Specific Instructions placed in service after July 31, 1986.)
and What Depreciation Is Not
• A “running balance” of the excess of Line 1. Taxable Income Refigured for the AMT?
the corporation’s total increases in
alternative minimum taxable income
or (Loss) Before Net Do not refigure depreciation for the
AMT for the following.
(AMTI) from prior year adjusted current Operating Loss • Residential rental property placed in
earnings (ACE) adjustments over the service after 1998.
total reductions in AMTI from prior year Deduction • Nonresidential real property with a
ACE adjustments (see the instructions Enter the corporation’s taxable income class life of 27.5 years or more
for line 4d on page 6). or (loss) before the NOL deduction, (generally, a building and its structural
after the special deductions, and components) placed in service after
without regard to any excess inclusion 1998 that is depreciated for the regular
Short Period Return (for example, if filing Form 1120, tax using the straight line method.
If the corporation is filing for a period of subtract line 29b from line 28 of that • Other section 1250 property placed
less than 12 months, AMTI must be form). in service after 1998 that is depreciated
annualized and the tentative minimum for the regular tax using the straight line
tax prorated based on the number of Line 2. Adjustments and method.
months in the short period. Complete • Property (other than section 1250
Form 4626 as follows. Preferences property) placed in service after 1998
1. Complete lines 1 through 6 in the that is depreciated for the regular tax
normal manner. Subtract line 6 from To avoid duplication, do not
using the 150% declining balance
line 5 to figure AMTI for the short ! include any AMT adjustment or
CAUTION preference taken into account
method or the straight line method.
period, but do not enter it on line 7.
on line 2i, 2j, 2k, or 2o in the amounts • Property for which the corporation
2. Multiply AMTI for the short period elected to use the alternative
to be entered on any other line of this
by 12. Divide the result by the number depreciation system (ADS) for the
form.
of months in the short period. Enter this regular tax.
result on line 7 and write “Sec. Line 2a. Depreciation of • Any qualified property eligible for a
443(d)(1)” on the dotted line to the left special depreciation allowance if the
of the entry space. Post-1986 Property depreciable basis of the property for the
3. Complete lines 8 through 11. AMT is the same as for the regular tax.
4. Subtract line 11 from line 10.
What Adjustments Are Not If the depreciable basis for the AMT is
Multiply the result by the number of Included As Depreciation the same as for the regular tax, no
months in the short period and divide Adjustments? adjustment is required for any
that result by 12. Enter the final result Do not make a depreciation adjustment depreciation figured on the remaining
on line 12 and write “Sec. 443(d)(2)” on on line 2a for: basis of the qualified property.
the dotted line to the left of the entry • A tax shelter farm activity. Take this However, if an election is in effect to
space. adjustment into account on line 2i. not have the special allowance apply,
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the corporation must refigure How is the AMT class life For the AMT, the regular tax
depreciation for the AMT. determined? For property placed in deductions under sections 616(a) and
• Any part of the cost of any property service before 1999, the class life used 617(a) are not allowed. Instead,
that the corporation elected to expense for the AMT is not necessarily the same capitalize these costs and amortize
under section 179. The reduction to the as the recovery period used for the them ratably over a 10-year period
depreciable basis of section 179 regular tax. beginning with the tax year in which the
property by the amount of the section The class lives are listed in Rev. corporation paid or incurred them. The
179 expense deduction is the same for Proc. 87-56, 1987-2 C.B. 674, Rev. 10-year amortization applies to 100% of
the regular tax and the AMT. Proc. 88-22, 1988-1 C.B. 785, and in the mining development and
• Certain public utility property (if a Pub. 946, How To Depreciate Property. exploration costs paid or incurred
normalization method of accounting is during the tax year. Do not reduce the
not used), motion picture films and See Pub. 946 for tables that can corporation’s AMT basis by the 30%
video tape, sound recordings, and TIP be used to figure AMT section 291 adjustment that applied for
property that the corporation elects to depreciation. Rev. Proc. 89-15, the regular tax.
exclude from MACRS by using a 1989-1 C.B. 816, and Pub. 946 have If the corporation had a loss on
depreciation method based on a term special rules for short tax years and for property for which mining exploration
of years, such as the unit-of-production property disposed of before the end of and development costs have not been
method. the recovery period. fully amortized for the AMT, the AMT
• Qualified Indian reservation property. deduction is the smaller of (a) the loss
See section 168(j). How Is the Line 2a Adjustment
allowable for the costs had they
• Qualified revitalization expenditures Figured? remained capitalized or (b) the
for a building for which the corporation Subtract the AMT deduction for remaining costs to be amortized for the
elected to claim the commercial depreciation from the regular tax AMT.
revitalization deduction. deduction and enter the result on line
• Any natural gas gathering line (as 2a. If the AMT deduction is more than Subtract the AMT deduction from the
defined in section 168(i)(17)) placed in the regular tax deduction, enter the regular tax deduction. Enter the result
service after April 11, 2005, the original difference as a negative amount. on line 2c. If the AMT deduction is more
use of which begins with the than the regular tax deduction, enter
corporation after April 11, 2005, and In addition to the AMT adjustment to the difference as a negative amount.
which is not under self-construction or the deduction for depreciation, also
subject to a binding contract in adjust the amount of depreciation that Line 2d. Amortization of
existence before April 12, 2005. was capitalized, if any, to account for
the difference between the rules for the Circulation Expenditures
How Is Depreciation Refigured regular tax and the AMT. Include on
for the AMT? this line the current year adjustment to Do not make this adjustment for
Property placed in service after 1998.
taxable income, if any, resulting from ! expenditures of a personal
CAUTION holding company for which the
the difference.
Use the same convention and recovery company elected the optional 3-year
period used for the regular tax. Use the Line 2b. Amortization of write-off for the regular tax.
straight line method for section 1250
property. For property other than Certified Pollution Control For the regular tax, circulation
section 1250 property, use the 150% Facilities expenditures may be deducted in full
declining balance method, switching to when paid or incurred. For the AMT,
For facilities placed in service before these expenditures must be capitalized
the straight line method the first tax 1999, figure the amortization deduction
year it gives a larger deduction. and amortized over 3 years beginning
for the AMT using ADS (that is, the with the tax year in which the
Property placed in service before straight line method over the facility’s expenditures were made.
1999. Refigure depreciation for the class life). For facilities placed in
AMT using ADS, with the same service after 1998, figure the If the corporation had a loss on
convention used for the regular tax. amortization deduction for the AMT property for which circulation
See the table below for the method and under MACRS using the straight line expenditures have not been fully
recovery period to use. method. Figure the AMT deduction amortized for the AMT, the AMT
using 100% of the asset’s amortizable deduction is the smaller of (a) the loss
Property Placed in Service basis. Do not reduce the corporation’s allowable for the expenditures had they
Before 1999 AMT basis by the 20% section 291 remained capitalized or (b) the
adjustment that applied for the regular remaining expenditures to be amortized
IF the property is . . . THEN use the . . . . . tax. for the AMT.
Section 1250 property. Straight line method Enter the difference between the Subtract the AMT deduction from the
over 40 years. AMT deduction and the regular tax regular tax deduction. Enter the result
Tangible property Straight line method deduction on line 2b. If the AMT on line 2d. If the AMT deduction is
(other than section over the property’s deduction is more than the regular tax more than the regular tax deduction,
1250 property) AMT class life. deduction, enter the difference as a enter the difference as a negative
depreciated using the negative amount. amount.
straight line method for
the regular tax.
Line 2c. Amortization of Line 2e. Adjusted Gain or
Any other tangible 150% declining Mining Exploration and Loss
property. balance method,
switching to the straight Development Costs If, during the tax year, the corporation
line method the first tax disposed of property for which it is
year it gives a larger Do not make this adjustment for making (or previously made) any of the
deduction, over the
property’s AMT class ! costs for which the corporation
CAUTION elected the optional 10-year
adjustments described on lines 2a
through 2d above, refigure the
life.
write-off for the regular tax. property’s adjusted basis for the AMT.
-3-
Then refigure the gain or loss on the deducted these amounts or excluded Generally, no loss is allowed. However,
disposition. them from income for the regular tax, if the corporation is insolvent, losses
The property’s adjusted basis for the add them back on line 2g. are allowed to the extent the
AMT is its cost minus all applicable corporation is insolvent (see section
depreciation or amortization deductions
Line 2h. Section 833(b) 58(c)).
allowed for the AMT during the current Deduction Disallowed losses of a personal
tax year and previous tax years. This deduction is not allowed for the service corporation are suspended until
Subtract this AMT basis from the sales AMT. If the corporation took this the corporation has income from that
price to get the AMT gain or loss. deduction for the regular tax, add it (or any other) passive activity or until
Dispositions for which line 2i, 2j, and back on line 2h. the passive activity is disposed of (that
2k adjustments are made. The is, its passive losses cannot offset “net
corporation may also have gains or
Line 2i. Tax Shelter Farm active income” (defined in section
losses from lines 2i, 2j, and 2k that Activities 469(e)(2)(B) or “portfolio income”)).
must be considered on line 2e. For Disallowed losses of a closely held
example, if for the regular tax the Complete this line only if the corporation that is not a personal
corporation reports a loss from the ! corporation is a personal service
CAUTION corporation and it has a gain or
service corporation are treated the
same except that, in addition, they may
disposition of an asset used in a
passive activity, include the loss in the loss from a tax shelter farm activity that be used to offset “net active income.”
computations for line 2j to determine if is not a passive activity. If the tax Keep adequate records for
any passive activity loss is limited for shelter farm activity is a passive TIP losses that are not deductible
the AMT. Then, include the AMT activity, include the gain or loss in the (and therefore carried forward)
passive activity loss allowed that relates computations for line 2j. for both the AMT and regular tax.
to the disposition of the asset on line 2e Refigure all gains and losses Enter on line 2j the difference
in determining the corporation’s AMT reported for the regular tax from tax between the AMT gain or loss and the
basis adjustment. It may be helpful to shelter farm activities by taking into regular tax gain or loss. Enter the
refigure the following for the AMT: Form account any AMT adjustments and difference as a negative amount if the
8810 and related worksheets, Schedule preferences. Determine the AMT gain corporation had:
D (Form 1120), Form 4684 (Section B), or loss using the rules for the regular • An AMT loss and a regular tax gain,
or Form 4797. tax with the following modifications. • An AMT loss that exceeds the
Enter on line 2e the difference • No loss is allowed except to the regular tax loss, or
between the regular tax gain or loss extent the personal service corporation • A regular tax gain that exceeds the
and the AMT gain or loss. Enter the is insolvent. AMT gain.
difference as a negative amount if any • Do not use a loss in the current tax
of the following apply. year to offset gains from other tax Tax Shelter Farm Activities That
• The AMT gain is less than the regular shelter farm activities. Instead, suspend Are Passive Activities
tax gain. any loss and carry it forward indefinitely Refigure all gains and losses reported
• The AMT loss exceeds the regular until the corporation has a gain in a for the regular tax by taking into
tax loss. subsequent tax year from that same tax account the corporation’s AMT
• The corporation has an AMT loss shelter farm activity or it disposes of the adjustments and preferences and AMT
and a regular tax gain. activity. prior year unallowed losses.
Keep adequate records for Use the same rules as outlined
Line 2f. Long-Term Contracts TIP losses that are not deductible above for other passive activities, with
For the AMT, the corporation generally (and therefore carried forward) the following modifications.
must use the percentage-of-completion for both the AMT and regular tax. • AMT gains from tax shelter farm
method described in section 460(b) to activities that are passive activities may
Enter on line 2i the difference
determine the taxable income from any be used to offset AMT losses from
between the AMT gain or loss and the
long-term contract (defined in section other passive activities.
regular tax gain or loss. Enter the
460(f)). However, this rule does not
difference as a negative amount if the • AMT losses from tax shelter farm
apply to any home construction contract activities that are passive activities may
corporation had:
(as defined in section 460(e)(6)).
• An AMT loss and a regular tax gain, not be used to offset AMT gains from
For contracts excepted from the • An AMT loss that exceeds the other passive activities. These losses
percentage-of-completion method for regular tax loss, or must be suspended and carried forward
the regular tax by section 460(e)(1), • A regular tax gain that exceeds the indefinitely until the corporation has a
determine the percentage of completion AMT gain. gain in a subsequent year from that
using the simplified procedures for same activity or it disposes of the
allocating costs outlined in section Line 2j. Passive Activities activity.
460(b)(3).
This adjustment applies only to Line 2k. Loss Limitations
Subtract the regular tax income from
the AMT income. Enter the difference !
CAUTION
closely held corporations and
personal service corporations.
Refigure gains and losses reported for
the regular tax from at-risk activities
on line 2f. If the AMT income is less and the corporation’s share of
than the regular tax income, enter the Refigure all passive activity gains distributive items from partnerships by
difference as a negative amount. and losses reported for the regular tax taking into account the corporation’s
by taking into account the corporation’s AMT adjustments and preferences. If
Line 2g. Merchant Marine AMT adjustments and preferences and the corporation has recomputed losses
Capital Construction Funds AMT prior year unallowed losses that that must be limited for the AMT by
Amounts deposited in these funds are apply to that activity. section 465 or section 704(d) or the
not deductible for the AMT. Earnings on Determine the corporation’s AMT corporation reported losses for the
these funds must be included in gross passive activity gain or loss using the regular tax from at-risk activities or
income for the AMT. If the corporation same rules used for the regular tax. distributive shares of partnership losses
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that were limited by those sections, such bond issued after December 31, 4626 through line 5, including the IDC
figure the difference between the loss 2008, is not interest on a specified preference. If the amount of the IDC
limited for the AMT and the loss limited private activity bond, and is therefore preference exceeds 40% of the amount
for the regular tax for each applicable not treated as a tax preference item to figured for line 5, enter the excess on
at-risk activity or distributive share of be entered on line 2m. See section line 2n (the benefit of this exception is
partnership loss. “Loss limited” means 57(a)(5)(C)(vi). Private activity bonds limited). If the amount of the IDC
the amount of loss that is not allowable also do not include certain housing preference is equal to or less than 40%
for the year because of the limitations bonds issued after July 30, 2008. See of the amount figured for line 5, do not
above. section 57(a)(5)(C)(iii). See section include an amount on line 2n for oil and
Enter on line 2k the excess of the 57(a)(5)(C) for other exceptions. gas wells (the benefit of this exception
loss limited for the AMT over the loss Do not include interest on qualified is not limited).
limited for the regular tax. If the loss Gulf Opportunity Zone bonds described
limited for the regular tax is more than in section 1400N(a) or qualified Line 2o. Other Adjustments
the loss limited for the AMT, enter the Midwestern disaster area bonds. And Preferences
difference as a negative amount. Enter the net amount of any other
Line 2n. Intangible Drilling adjustments and preferences, including
Line 2l. Depletion Costs the following.
Refigure depletion using only income Income eligible for the American
and deductions allowed for the AMT Do not make this adjustment for Samoa economic development
when refiguring the limit based on ! costs for which the corporation
CAUTION elected the optional 60-month
credit. If this income was included in
taxable income from the property under the corporation’s taxable income for the
section 613(a) and the limit based on write-off for the regular tax. regular tax, include this amount on line
taxable income, with certain Intangible drilling costs (IDCs) from 2o as a negative amount.
adjustments, under section 613A(d)(1). oil, gas, and geothermal properties are
Also, the depletion deduction for mines, Income from the alcohol, biodiesel,
a preference to the extent excess IDCs and renewable diesel fuels credits.
wells, and other natural deposits is exceed 65% of the net income from the
limited to the property’s adjusted basis If this income was included in the
properties. Figure the preference for all corporation’s income for the regular tax,
at the end of the year, as refigured for geothermal deposits separately from
the AMT, unless the corporation is an include this amount on line 2o as a
the preference for all oil and gas negative amount.
independent producer or royalty owner properties that are not geothermal
claiming percentage depletion for oil deposits. Income as the beneficiary of an
and gas wells. Figure this limit estate or trust. If the corporation is
Excess IDCs. Excess IDCs are the
separately for each property. When the beneficiary of an estate or trust,
excess of:
refiguring the property’s adjusted basis, include on line 2o the AMT adjustment
• The amount of IDCs the corporation from Schedule K-1 (Form 1041), Part
take into account any AMT adjustments paid or incurred for oil, gas, or
the corporation made this year or in III, box 12.
geothermal properties that it elected to
previous years that affect basis (other expense for the regular tax (not Net AMT adjustment from an electing
than the current year’s depletion). Do including any IDCs paid or incurred for large partnership. If the corporation
not include in the property’s adjusted nonproductive wells) reduced by the is a partner in an electing large
basis any unrecovered costs of section 291(b)(1) adjustment for partnership, include on line 2o the
depreciable tangible property used to integrated oil companies and increased amount from Schedule K-1 (Form
exploit the deposits (for example, by any IDCs allowed to be amortized 1065-B), box 6. Also include on line 2o
machinery, tools, pipes, etc.). under section 291(b)(2) over any amount from Schedule K-1 (Form
For iron ore and coal (including • The amount that would have been 1065-B), box 5, unless the corporation
lignite), apply the section 291 allowed if the corporation had is a closely held or personal service
adjustment before figuring this amortized that amount over a corporation. Closely held and personal
preference. 120-month period starting with the service corporations should take any
month the well was placed in amount from box 5 into account when
Enter on line 2l the difference figuring the amount to enter on line 2j.
between the regular tax and the AMT production or, alternatively, had elected
deduction. If the AMT deduction is any method that is permissible in Patron’s AMT adjustment.
more than the regular tax deduction, determining cost depletion. Distributions the corporation received
enter the difference as a negative Net income from oil, gas, and from a cooperative may be includible in
amount. geothermal properties. Net income is income. Unless the distributions are
the gross income the corporation nontaxable, include on line 2o the total
Line 2m. Tax-Exempt Interest received or accrued from all oil, gas, AMT patronage dividend adjustment
Income From Specified and geothermal wells minus the reported to the corporation from the
deductions allocable to these properties cooperative.
Private Activity Bonds (reduced by the excess IDCs). When Cooperative’s AMT adjustment. If
Enter on line 2m interest income from refiguring net income, use only income the corporation is a cooperative,
specified private activity bonds, and deductions allowed for the AMT. refigure the cooperatives deduction for
reduced by any deduction that would Exception. The preference for IDCs patronage dividends by taking into
have been allowable if the interest were from oil and gas wells does not apply to account the cooperatives AMT
includible in gross income for the corporations that are independent adjustments and preferences. Subtract
regular tax. producers (that is, not integrated oil the cooperatives AMT deduction for
Generally, a specified private activity companies as defined in section patronage dividends from its regular tax
bond is any private activity bond (as 291(b)(4)). However, this benefit may deduction for patronage dividends and
defined in section 141) issued after be limited. First, figure the IDC include the result on line 2o. If the AMT
August 7, 1986, on which the interest is preference as if this exception did not deduction is more than the regular tax
not includible in gross income for the apply. Then, for purposes of this deduction, include the result as a
regular tax. However, interest on any exception, complete a second Form negative amount.
-5-
Domestic production activities convention, no salvage value, and a as a negative ACE adjustment on line
deduction. For the AMT, figure the recovery period of 15 years (22 years 4e only if the corporation’s total
corporation’s domestic production for 15-year public utility property). increases in AMTI from prior year ACE
activities deduction under section 199 Figure this amount separately for adjustments exceed its total reductions
without taking into account any AMT each property and include only positive in AMTI from prior year ACE
adjustments and preferences. The adjustments on line 2o. adjustments (line 4d). The purpose of
section 199 deduction for the line 4d is to provide a “running balance”
corporation’s AMT is 6% of the smaller Related adjustments. AMT of this limitation amount. As such, the
of (a) the qualified production activities adjustments and preferences may corporation must keep adequate
income or (b) the alternative minimum affect deductions that are based on an records (for example, a copy of Form
taxable income (AMTI), determined income limit (for example, charitable 4626 completed at least through line 5)
without taking into account the section contributions). Refigure these from year to year (even in years in
199 deduction. Subtract the deductions using the income limit as which it does not owe any AMT).
corporation’s AMT section 199 modified for the AMT. Include on line
2o an adjustment for the difference Any potential negative ACE
deduction from its regular tax section adjustment that is not allowed as a
199 deduction and include the result on between the regular tax and AMT
amounts for all such deductions. If the negative ACE adjustment in a tax year
line 2o. If the AMT deduction is more because of the line 4d limitation cannot
than the regular tax deduction, include AMT deduction is more than the regular
tax deduction, include the difference as be used to reduce a positive ACE
the result as a negative amount. adjustment in any other tax year.
a negative amount.
Installment sales. The installment Combine lines 4d and 4e of the 2007
method does not apply for the AMT to Line 4. Adjusted Current Form 4626 and enter the result on line
any nondealer disposition of property 4d of the 2008 form, but do not enter
that occurred after August 16, 1986, but Earnings (ACE) less than zero.
before the first day of the corporation’s Example. Corporation C, a
tax year that began in 1987, if an Adjustment calendar-year corporation, was
installment obligation to which the incorporated January 1, 2004. Its ACE
proportionate disallowance rule applied The ACE adjustment does not
and pre-adjustment AMTI for 2004
arose from the disposition. Include as a ! apply to a regulated investment
CAUTION company or a real estate
through 2008 were as follows.
negative adjustment on line 2o the
amount of installment sale income investment trust. Also, for an affiliated Pre-
group filing a consolidated return under adjustment
reported for the regular tax. Year ACE AMTI
the rules of section 1501, figure line 4b
Accelerated depreciation of real on a consolidated basis. 2004 $700,000 $800,000
property and certain leased personal
Line 4b. The following examples 2005 900,000 600,000
property (pre-1987).
illustrate the manner in which line 3 is 2006 400,000 500,000
This preference generally subtracted from line 4a to get the 2007 (100,000) 300,000
! applies only to property placed
CAUTION in service after 1987, but
amount to enter on line 4b. 2008 250,000 100,000
Example 1. Corporation A has line 4a Corporation C subtracts its
depreciated using pre-1987 rules due to ACE of $25,000. If Corporation A has
transition provisions of the Tax Reform pre-adjustment AMTI from its ACE in
line 3 pre-adjustment AMTI in the each of the years and then multiplies
Act of 1986. amounts shown below, its line 3 and the result by 75% to get the following
Refigure depreciation for the AMT line 4a amounts would be combined as potential ACE adjustments for 2004
using the straight line method for real follows to determine the amount to through 2008.
property for which accelerated enter on line 4b.
depreciation was determined for the ACE minus Potential
regular tax using pre-1987 rules. Use a pre-adjustment ACE
Line 4a ACE $25,000 $25,000 $25,000 Year AMTI adjustment
recovery period of 19 years for 19-year
real property and 15 years for Line 3 pre-adj. 2004 $(100,000) $ (75,000)
low-income housing property. Figure AMTI 10,000 30,000 (50,000) 2005 300,000 225,000
the excess of the regular tax 2006 (100,000) (75,000)
depreciation over the AMT depreciation Amount to enter 2007 (400,000) (300,000)
separately for each property and on line 4b $15,000 $(5,000) $75,000 2008 150,000 112,500
include only positive adjustments on Example 2. Corporation B has line 4a
line 2o. Under these facts, Corporation C
ACE of $(25,000). If Corporation B has has the following increases or
The adjustment for leased personal line 3 pre-adjustment AMTI in the reductions in AMTI for 2004 through
property only applies to personal amounts shown below, its line 3 and 2008.
holding companies. For leased line 4a amounts would be combined as
personal property other than recovery follows to determine the amount to Increase or (reduction)
property, enter the excess of the enter on line 4b. in AMTI from ACE
Year adjustment
depreciation claimed for the property for
the regular tax using pre-1987 rules Line 4a ACE $(25,000) $(25,000) $(25,000) 2004 $0
over the depreciation allowable for the 2005 225,000
AMT as refigured using the straight line Line 3 pre-adj. 2006 (75,000)
method. AMTI (10,000) (30,000) 50,000 2007 (150,000)
For leased 10-year recovery 2008 112,500
Amount to enter
property and leased 15-year public on line 4b $(15,000) $5,000 $(75,000)
utility property, enter the excess of the In 2004, Corporation C was not
regular tax depreciation over the Line 4d. A potential negative ACE allowed to reduce its AMTI by any part
depreciation allowable using the adjustment (that is, a negative amount of the potential negative ACE
straight line method with a half-year on line 4b multiplied by 75%) is allowed adjustment because it had no increases
-6-
in AMTI from prior year ACE the section 172(d) modifications must The ATNOL can be carried back or
adjustments. be separately figured for the ATNOL). forward using the rules outlined in
In 2005, Corporation C had to section 172(b). An election under
In applying the rules relating to the
increase its AMTI by the full amount of section 172(b)(3) to forego the
determination of the amount of
its potential ACE adjustment. It was not carryback period for the regular tax also
carrybacks and carryforwards, use the
allowed to use any part of its 2004 applies for the AMT.
modification to those rules described in
unallowed potential negative ACE section 56(d)(1)(B)(ii). The ATNOL carried back or forward
adjustment of $75,000 to reduce its may differ from the NOL (if any) that is
2005 positive ACE adjustment of The ATNOLD is generally limited to
90% of AMTI determined without regard carried back or forward for the regular
$225,000. tax. Keep adequate records for both the
to the ATNOLD and any domestic
In 2006, Corporation C was allowed production activities deduction under AMT and the regular tax.
to reduce its AMTI by the full amount of section 199. To figure AMTI without
its potential negative ACE adjustment
because that amount is less than its
regard to the ATNOLD, use a second Line 7. Alternative
Form 4626 as a worksheet. Complete
line 4d limit of $225,000. the second Form 4626 through line 5, Minimum Taxable
In 2007, Corporation C was allowed but when figuring lines 2l and 2o, treat
to reduce its AMTI by only $150,000. Its line 6 as if it were zero. The amount Income
potential negative ACE adjustment of figured on line 5 of the second Form For a corporation that held a residual
$300,000 was limited to its 2005 4626 is the corporation’s AMTI interest in a REMIC and is not a thrift
increase in AMTI of $225,000 minus its determined without regard to the institution, line 7 may not be less than
2006 reduction in AMTI of $75,000. ATNOLD. Add any domestic production the total of the amounts shown on
activities deduction to this tentative Schedule(s) Q (Form 1066), Quarterly
In 2008, Corporation C must total. The ATNOLD limitation is 90% of Notice to Residual Interest Holder of
increase its AMTI by the full amount of this amount. REMIC Taxable Income or Net Loss
its potential ACE adjustment. It cannot Allocation, line 2c, for the periods
use any part of its 2007 unallowed However, if an ATNOL carried back included in the corporation’s tax year. If
potential negative ACE adjustment of or carried forward to the tax year is the total of the line 2c amounts is larger
$150,000 to reduce its 2008 positive attributable to qualified disaster losses than the amount the corporation would
ACE adjustment of $112,500. (as defined in section 172(j)), qualified otherwise enter on line 7, enter that
Corporation C would complete the Gulf Opportunity Zone losses (as total and write “Sch. Q” on the dotted
relevant portion of its 2008 Form 4626 defined in section 1400N(k)(2)), line next to line 7.
as follows. qualified recovery assistance losses (as
Line Amount
defined in Pub. 4492-A, Information for
Taxpayers Affected by the May 4, 2007 Line 8. Exemption
4a $250,000 Kansas Storms and Tornadoes), or
4b 150,000 qualified disaster recovery assistance Phase-Out Computation
4c 112,500 losses (as defined in Pub. 4492-B); the Line 8a. If this Form 4626 is for a
4d -0- ATNOLD for the tax year is limited to member of a controlled group of
4e 112,500 the sum of: corporations, subtract $150,000 from
1. The smaller of: the combined AMTI of all members of
a. The sum of the ATNOL the controlled group. Divide the result
Line 6. Alternative Tax carrybacks and carryforwards to the tax among the members of the group in the
same manner as the $40,000 tentative
Net Operating Loss year attributable to net operating losses
other than qualified disaster losses, exemption is divided among the
Deduction (ATNOLD) qualified Gulf Opportunity Zone losses, members. Enter this member’s share
The ATNOLD is the sum of the qualified recovery assistance losses, on line 8a. The tentative exemption
alternative tax net operating loss and qualified disaster recovery must be divided equally among the
(ATNOL) carrybacks and carryforwards assistance losses; or members, unless all members consent
to the tax year, subject to the limitation b. Ninety percent of AMTI for the tax to a different allocation. See section
explained below. For a corporation that year (figured without regard to the 1561 for details.
held a residual interest in a real estate ATNOLD, as discussed earlier, and the Line 8c. If this Form 4626 is for a
mortgage investment conduit (REMIC), domestic production activities deduction member of a controlled group of
figure the ATNOLD without regard to under section 199) plus corporations, reduce the member’s
any excess inclusion. 2. The smaller of: share of the $40,000 tentative
a. The sum of the ATNOL exemption by the amount entered on
NOLs arising in tax years carrybacks and carryforwards to the tax line 8b.
! beginning before August 6,
CAUTION 1997, can be carried forward no
year attributable to qualified disaster
losses, qualified Gulf Opportunity Zone
more than 15 years. Therefore, the losses, qualified recovery assistance Line 10. Reduction of
corporation cannot carry forward an losses, and qualified disaster recovery
NOL to this tax year from a loss year assistance losses; or
Alternative Minimum Tax
beginning before 1992. b. 100% of AMTI for the tax year for Corporations Having
The ATNOL for a loss year is the (figured without regard to the ATNOLD,
excess of the deductions allowed in as discussed earlier, and the domestic Qualified Timber Gain
figuring AMTI (excluding the ATNOLD) production activities deduction under If the corporation has qualified timber
over the income included in AMTI. This section 199) reduced by the amount gain under section 1201(b), complete
excess is figured with the modifications determined under 1, above. new Part II. Enter the amount from Part
in section 172(d), taking into account II, line 24 on Part I, line 10. Otherwise,
the adjustments in sections 56 and 58 Enter on line 6 the smaller of the multiply line 9 by 20% and enter that
and preferences in section 57 (that is, ATNOLD or the ATNOLD limitation. amount on line 10.
-7-
foreign tax credit for each separate section 382(h)) undergoes an
Line 11. Alternative limitation category that the corporation ownership change (within the meaning
Minimum Tax Foreign cannot claim (because of the limitation of section 382(g) and Regulations
fraction) is treated as a credit carryback section 1.56(g)-1(k)(2)), refigure the
Tax Credit (AMTFTC) or carryforward for that limitation adjusted basis of each asset of the
The AMTFTC is the foreign tax credit category under section 904(c). Because corporation (immediately after the
refigured as follows. these amounts may differ from the ownership change). The new adjusted
amounts that are carried back or basis of each asset is its proportionate
1. Complete a separate AMT Form forward for the regular tax, keep share (based on respective fair market
1118, Foreign Tax adequate records for both the AMT and values) of the fair market value of the
Credit — Corporations, for each regular tax. When carried back or corporation’s assets (determined under
separate limitation category specified at forward, the credit is reported on section 382(h)) immediately before the
the top of Form 1118. Include as a Schedule B, Part II, line 5, of the ownership change.
separate limitation category dividends carryover year’s AMT Form 1118 for
received from a corporation that To determine if the corporation has a
that separate limitation category. net unrealized built-in loss immediately
qualifies for the American Samoa
economic development credit if the before an ownership change, use the
Simplified Limitation aggregate adjusted basis of its assets
dividends-received deduction for those
dividends is disallowed under the ACE Election used for figuring its ACE. Also, use
rules. The corporation may elect to use a these new adjusted bases for all future
simplified section 904 limitation to figure ACE calculations (such as depreciation
In determining if any income is
its AMTFTC. The corporation must and gain or loss on disposition of an
“high-taxed” in applying the separate
make the election for its first tax year asset).
limitation categories, use the AMT rate
(20%) instead of the regular tax rate. beginning after 1997 for which it claims Line 2. ACE Depreciation
an AMTFTC. If it does not make the
2. For each separate AMT Form Adjustment
election for that tax year, it may not
1118, if the corporation previously
make the election for a later tax year. Line 2a. AMT depreciation.
made or is making the simplified
Once made, the election applies to all Generally, the amount entered on this
limitation election (discussed below),
later tax years and may only be line is the depreciation the corporation
skip Schedule A and enter on Schedule
revoked with IRS consent. claimed for the regular tax (Form 4562,
B, Part II, line 7, the same amount you
entered on that line for the regular tax. If the corporation made the election line 22), modified by the AMT
Otherwise, complete Schedule A using for each of its AMT separate limitations, depreciation adjustments reported on
only income and deductions that are the corporation uses its separate lines 2a and 2o of Form 4626.
allowed for the AMT and attributable to limitation income or loss that it Line 2b(1). Post-1993 property. For
sources outside the United States. determined for the regular tax (instead property placed in service after 1993,
3. For each separate AMT Form of refiguring the separate limitation the ACE depreciation is the same as
1118, complete Schedule B, Part II. income or loss for the AMT, as the AMT depreciation. Therefore, enter
Enter any AMTFTC carryover on described earlier). on line 2b(1) the same depreciation
Schedule B, Part II, line 5. Enter the expense you included on line 2a of this
AMTI from Form 4626, line 7, on Line 13 worksheet for such property.
Schedule B, Part II, line 8a. Enter the Enter the corporation’s regular tax Line 2b(2). Post-1989, pre-1994
amount from Form 4626, line 10, on liability (as defined in section 26(b)) property. For property placed in
Schedule B, Part II, line 10. When minus any foreign tax credit and minus service in a tax year that began after
completing Schedule B, treat as a tax any American Samoa economic 1989 and before 1994, use the ADS
paid to a foreign country 75% of any development credit (for example, Form depreciation described in section
withholding or income tax paid to 1120, Schedule J, line 2; minus any 168(g). However, for property (a)
American Samoa on dividends received foreign tax credit entered on Schedule placed in service in a tax year that
from a corporation that qualifies for the J, line 5a; and minus any American began after 1989 and (b) described in
American Samoa economic Samoa economic development credit sections 168(f)(1) through (4), use the
development credit (if the from Form 5735). Do not include any: same depreciation claimed for the
dividends-received deduction for those • Tax on accumulation distribution of regular tax and enter it on line 2b(5).
dividends is disallowed under the ACE trusts from Form 4970, Line 2b(3). Pre-1990 MACRS
rules). • Recapture of investment credit property. For MACRS property
4. For the AMT Form 1118, (under section 49(b) or 50(a)) from generally placed in service after 1986
complete Schedule B, Part III, Form 4255, and in a tax year that began before
Summary of Separate Credits. The total • Recapture of low-income housing 1990, figure depreciation by using the
foreign tax credit is the amount on line credit (under section 42(j) or (k)) from property’s AMT adjusted basis as of the
6. Form 8611, or close of the last tax year beginning
5. Enter on Form 4626, line 11, the • Recapture of any other credit. before 1990 and by using the straight
smaller of: line method over the remainder of the
• The amount on Form 4626, line recovery period for the property under
10, or Adjusted Current ADS. In doing so, use the convention
• The amount from the AMT Form that would have applied to the property
1118, Schedule B, Part III, line 6. Earnings (ACE) under section 168(d). For more
information (including an example that
Worksheet Instructions illustrates the application of these
The corporation can use any
reasonable method, consistently rules), see Regulations section
applied, to apportion the disallowed
Treatment of Certain 1.56(g)-1(b)(2).
amount among the separate limitation Ownership Changes Line 2b(4). Pre-1990 original ACRS
categories (including the general If a corporation with a net unrealized property. For ACRS property
limitation income category). Any AMT built-in loss (within the meaning of generally placed in service in a tax year
-8-
that began after 1980 and before 1987, An income item is considered taken • Any allowable domestic production
figure depreciation by using the into account without regard to the activities deduction under section 199.
property’s regular tax adjusted basis as timing of its inclusion in a corporation’s
Special rules apply to:
of the close of the last tax year pre-adjustment AMTI or its E&P. Only
beginning before 1990 and by using the income items that are permanently
• Dividends from certain possession
corporations operating in American
straight line method over the remainder excluded from pre-adjustment AMTI are
Samoa.
of the recovery period for the property included in ACE. An income item will
under ADS. In doing so, use the not be considered taken into account
• Certain dividends received by certain
cooperatives.
convention that would have applied to merely because the proceeds from that
the property under section 168(d) item might eventually be reflected in the An item is considered taken into
(without regard to section 168(d)(3)). pre-adjustment AMTI of another account without regard to the timing of
For more information (including an taxpayer (for example, that of a its deductibility in figuring
example that illustrates the application shareholder) on the liquidation or pre-adjustment AMTI or E&P.
of these rules), see Regulations section disposal of a business. Therefore, only deduction items that are
1.56(g)-1(b)(3). Exceptions. Do not make an permanently disallowed in figuring E&P
adjustment for the following. are disallowed in figuring ACE.
Line 2b(5). Property described in
sections 168(f)(1) through (4). For • Any income from discharge of Items for which no adjustment is
this property, use the regular tax indebtedness excluded from gross necessary. Generally, no deduction is
depreciation, regardless of when the income under section 108 (or the allowed for an item in figuring ACE if
property was placed in service. corresponding provision of prior law). the item is not deductible in figuring
• Any extraterritorial income excluded pre-adjustment AMTI (even if the item
Line 2b(5) takes priority over from gross income under section 114. is deductible in figuring E&P). The only
! lines 2b(1), 2b(2), 2b(3), and
CAUTION 2b(4). For property that is
• For an insurance company taxed exceptions to this general rule are the
under section 831(b), any amount not related reductions to an income item
described in sections 168(f)(1) through included in gross investment income described in the second sentence of
(4), use line 2b(5) instead of the line (as defined in section 834(b)). the instructions for line 3 above.
2b(1), 2b(2), 2b(3), or 2b(4) that would • Any special subsidy payment for Deductions that are not allowed in
otherwise apply. prescription drug plans excluded from figuring ACE include:
Line 2b(6). Other property. Use the gross income under section 139A. • Capital losses that exceed capital
regular tax depreciation for (a) property • Any qualified shipping income gains;
placed in service before 1981 and (b) excluded under section 1357. • Bribes, fines, and penalties
property placed in service after 1980, in • Tax-exempt interest on certain disallowed under section 162;
a tax year that began before 1990, that housing bonds issued after July 30, • Charitable contributions that exceed
is excluded from MACRS by section 2008, excluded under section the limitations of section 170;
168(f)(5)(A)(i) or original ACRS by 57(a)(5)(C)(iii). • Meals and entertainment expenses
section 168(e)(4), as in effect before • Tax-exempt interest on private that exceed the limitations of section
the Tax Reform Act of 1986. activity bonds issued after December 274;
31, 2008, excluded under section • Federal taxes disallowed under
Line 2c. Total ACE depreciation. 56(g)(4)(B)(iv). section 275; and
Subtract line 2b(7) from line 2a and
Line 3d. Include in ACE the income • Golden parachute payments that
enter the result on line 2c. If line 2b(7) exceed the limitation of section 280G.
exceeds line 2a, enter the difference as on life insurance contracts (as
a negative amount. determined under section 7702(g)) for Line 4e. Do not include any
the tax year minus the part of any adjustment related to the E&P effects of
Line 3. Inclusion in ACE of premium attributable to insurance any charitable contribution.
Items Included in Earnings and coverage.
Line 3e. Do not include any Line 5. Other Adjustments
Profits (E&P)
In general, any income item that is not adjustment related to the E&P effects of Line 5a. Except as noted below, in
taken into account (see below) in any charitable contribution. figuring ACE, determine the deduction
determining the corporation’s for intangible drilling costs under
Line 4. Disallowance of Items section 312(n)(2)(A).
pre-adjustment AMTI but that is taken Not Deductible From E&P
into account in determining its E&P Subtract the ACE expense (if any)
must be included in ACE. Any such Generally, no deduction is allowed
when figuring ACE for items not taken from the AMT expense (used to figure
income item can be reduced by all line 2n of Form 4626) and enter the
items related to that income item and into account (see below) in figuring
E&P for the tax year. These amounts result on line 5a. If the ACE expense
that would be deductible when figuring exceeds the AMT amount, enter the
pre-adjustment AMTI if the income increase ACE if they are deductible in
figuring pre-adjustment AMTI (that is, result as a negative amount.
items to which they relate were
included in the corporation’s they would be positive adjustments). Exception. The above rule does not
pre-adjustment AMTI for the tax year. However, there are exceptions. Do apply to amounts paid or incurred for
Examples of these income items and not add back: any oil or gas well by corporations that
the adjustments that relate to them • Any deduction allowable under are independent producers (that is, not
include: section 243 or 245 for any dividend that integrated oil companies as defined in
• Interest income from tax-exempt qualifies for a 100% dividends-received section 291(b)(4)). If this exception
obligations excluded under section 103 deduction under section 243(a), 245(b), applies, do not enter an amount on line
minus any costs incurred in carrying or 245(c) and 5a for oil and gas wells.
these tax-exempt obligations and • Any dividend received from a Line 5b. When figuring ACE, the
• Proceeds of life insurance contracts 20%-owned corporation (see section current year deduction for circulation
excluded under section 101 minus the 243(c)(2)), but only if the dividend is expenditures under section 173 does
basis in the contract for purposes of from income of the paying corporation not apply. Therefore, treat circulation
ACE. that is subject to federal income tax. expenditures for ACE using the case
-9-
law that existed before section 173 was Line 7. Acquisition Expenses of • The ACE loss is more than the AMT
enacted. Life Insurance Companies for loss.
Subtract the ACE expense (if any) Qualified Foreign Contracts • The corporation had an ACE loss
from the regular tax expense (for a and an AMT gain.
For ACE, acquisition expenses of life
personal holding company, from the insurance companies for qualified
AMT expense used to figure line 2d of foreign contracts (as defined in section
Form 4626) and enter the result on line 807(e)(4) without regard to the Part II
5b. If the ACE expense exceeds the treatment of reinsurance contract rules
regular tax amount (for a personal Line 15. Enter qualified timber gain
of section 848(e)(5)) must be from Schedule D (Form 1120), line 15,
holding company, the AMT amount), capitalized and amortized by applying
enter the result as a negative amount. as refigured for the AMT, if necessary
the treatment generally required under (for example, after any timber depletion
Do not make this adjustment for generally accepted accounting adjustments for the AMT). If the
! expenditures for which the
CAUTION corporation elected the optional
principles (and as if this rule applied to
such contracts for all applicable tax
corporation is filing Form 1120-RIC,
enter the amount from Part II, line 4, of
3-year write-off under section 59(e) for years). Form 1120-RIC, as refigured for the
the regular tax. Subtract the ACE expense (if any) AMT, if necessary.
Line 5c. When figuring ACE, the from the regular tax expense and enter
amortization provisions of section 248 the result on line 7. If the ACE expense
do not apply. Therefore, charge all Paperwork Reduction Act Notice.
is more than the regular tax expense,
organizational expenditures to a capital We ask for the information on this form
enter the result as a negative amount.
account and do not take them into to carry out the Internal Revenue laws
account when figuring ACE until the Line 8. Depletion of the United States. You are required
corporation is sold or otherwise to give us the information. We need it to
When figuring ACE, the allowance for ensure that you are complying with
disposed of. Enter on line 5c all depletion for any property placed in
amortization deductions for these laws and to allow us to figure and
service in a tax year that began after collect the right amount of tax.
organizational expenditures that were 1989 generally must be determined
taken for the regular tax during the tax under the cost depletion method.
year. You are not required to provide the
Line 5d. The adjustments provided in Subtract the ACE expense (if any) information requested on a form that is
section 312(n)(4) apply in figuring ACE. from the AMT expense (used to figure subject to the Paperwork Reduction Act
See Regulations section 1.56(g)-1(f)(3). line 2l of Form 4626) and enter the unless the form displays a valid OMB
Line 5e. For any installment sale in a result on line 8 of the worksheet. If the control number. Books or records
tax year that began after 1989, a ACE expense is more than the AMT relating to a form or its instructions
corporation generally cannot use the amount, enter the result as a negative must be retained as long as their
installment method to figure ACE. amount. contents may become material in the
However, it may use the installment Exception. Independent oil and gas administration of any Internal Revenue
method for the applicable percentage producers and royalty owners that law. Generally, tax returns and return
(as determined under section 453A) of figured their regular tax depletion information are confidential, as required
the gain from any installment sale to deduction under section 613A(c) do not by section 6103.
which section 453A(a)(1) applies. have an adjustment for ACE purposes.
Subtract the installment sale income The time needed to complete and
reported for AMT from the ACE income Line 9. Basis Adjustments in file this form will vary depending on
from the sales and enter the result on Determining Gain or Loss From individual circumstances. The
line 5e. If the ACE income from the Sale or Exchange of Pre-1994 estimated average time is:
sales is less than the AMT amount, Property
enter the difference as a negative Recordkeeping . . . . . . . 18 hr., 39 min.
If, during the tax year, the corporation Learning about the law
amount. disposed of property for which it is or the form . . . . . . . . . . 12 hr., 00 min.
Line 6. Disallowance of Loss on making (or previously made) any of the Preparing and sending
Exchange of Debt Pools ACE adjustments, refigure the the form to the IRS . . . . 12 hr., 51 min.
property’s adjusted basis for ACE. Then
When figuring ACE, a corporation may refigure the property’s gain or loss.
not recognize any loss on the exchange
If you have comments concerning
of any pool of debt obligations for any Enter the difference between the
the accuracy of these time estimates or
other pool of debt obligations having AMT gain or loss (used to figure line 2e
suggestions for making this form
substantially the same effective interest of Form 4626) and the ACE gain or
simpler, we would be happy to hear
rates and maturities. Add back (that is, loss. Enter the difference as a negative
from you. See the instructions for the
enter as a positive adjustment) on line amount if any of the following apply.
tax return with which this form is filed.
6 any such loss to the extent • The ACE gain is less than the AMT
recognized for the regular tax. gain.
-10-
Adjusted Current Earnings (ACE) Worksheet
See ACE Worksheet Instructions (which begin on page 8).
1 Pre-adjustment AMTI . Enter the amount from line 3 of Form 4626 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 ACE depreciation adjustment:
a AMT depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2a
b ACE depreciation:
(1) Post-1993 property . . . . . . . . . . . . . . . . . . . . . . 2b(1)
(2) Post-1989, pre-1994 property . . . . . . . . . . . . . . . 2b(2)
(3) Pre-1990 MACRS property . . . . . . . . . . . . . . . . 2b(3)
(4) Pre-1990 original ACRS property . . . . . . . . . . . . 2b(4)
(5) Property described in sections 168(f)(1) through
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2b(5)
(6) Other property . . . . . . . . . . . . . . . . . . . . . . . . . 2(b6)
(7) Total ACE depreciation. Add lines 2b(1) through 2b(6) . . . . . . . . . . . . . . . 2b(7)
c ACE depreciation adjustment. Subtract line 2b(7) from line 2a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2c
3 Inclusion in ACE of items included in earnings and profits (E&P):
a Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3a
b Death benefits from life insurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 3b
c All other distributions from life insurance contracts (including surrenders) . . . . . . 3c
d Inside buildup of undistributed income in life insurance contracts . . . . . . . . . . . 3d
e Other items (see Regulations sections 1.56(g)-1(c)(6)(iii) through (ix) for a partial
list) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3e
f Total increase to ACE from inclusion in ACE of items included in E&P. Add lines 3a through 3e 3f
4 Disallowance of items not deductible from E&P:
a Certain dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4a
b Dividends paid on certain preferred stock of public utilities that are deductible
under section 247 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4b
c Dividends paid to an ESOP that are deductible under section 404(k) 4c
d Nonpatronage dividends that are paid and deductible under section 1382(c) . . . 4d
e Other items (see Regulations sections 1.56(g)-1(d)(3)(i) and (ii) for a partial list) 4e
f Total increase to ACE because of disallowance of items not deductible from E&P. Add lines 4a through 4e 4f
5 Other adjustments based on rules for figuring E&P:
a Intangible drilling costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5a
b Circulation expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5b
c Organizational expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5c
d LIFO inventory adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5d
e Installment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5e
f Total other E&P adjustments. Combine lines 5a through 5e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5f
6 Disallowance of loss on exchange of debt pools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Acquisition expenses of life insurance companies for qualified foreign contracts . . . . . . . . . . . . . . . . . . . . 7
8 Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 Basis adjustments in determining gain or loss from sale or exchange of pre-1994 property . . . . . . . . . . . . . 9
10 Adjusted current earnings. Combine lines 1, 2c, 3f, 4f, and 5f through 9. Enter the result here and on line
4a of Form 4626 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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