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Instructions for Form 4626 2003 Tax Year

General Instructions

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

Purpose of Form

Use Form 4626 to figure the alternative minimum tax (AMT) under section 55 for a corporation that is not exempt from the AMT.


Note:

For an affiliated group filing a consolidated return under the rules of section 1501, AMT must be figured on a consolidated basis.

Who Must File

If the corporation is a “small corporation” exempt from the AMT (as explained below), do not file Form 4626. Otherwise, file Form 4626 if:

  • The corporation's taxable income or (loss) before the net operating loss (NOL) deduction plus its adjustments and preferences total more than $40,000 or, if smaller, its allowable exemption amount or
  • The corporation claims any general business credit, the qualified electric vehicle credit, the nonconventional source fuel credit, or the credit for prior year minimum tax.

Exemption for Small Corporations

A corporation is treated as a small corporation exempt from the AMT for its tax year beginning in 2003 if that year is the corporation's first tax year in existence (regardless of its gross receipts for the year) or:

  1. It was treated as a small corporation exempt from the AMT for all prior tax years beginning after 1997 and
  2. Its average annual gross receipts for the 3-tax-year period (or portion thereof during which the corporation was in existence) ending before its tax year beginning in 2003 did not exceed $7.5 million ($5 million if the corporation had only 1 prior tax year).

The following rules apply when figuring gross receipts under 2 above.

  • Gross receipts must be figured using the corporation's tax accounting method and include total sales (net of returns and allowances), amounts received for services, and income from investments and other sources. See Temporary Regulations section 1.448-1T(f)(2)(iv) for more details.
  • Gross receipts include those of any predecessor of the corporation, including non-corporate entities.
  • For a short tax year, gross receipts must be annualized by multiplying them by 12 and dividing the result by the number of months in the tax year.
  • The gross receipts of all persons treated as a single employer under section 52(a), 52(b), 414(m), or 414(o) must be aggregated.

Loss of small corporation status.   If the corporation qualified as a small corporation exempt from the AMT for its previous tax year, but does not meet the gross receipts test for its tax year beginning in 2003, it loses its AMT exemption status. Special rules apply in figuring AMT for the tax year beginning in 2003 and all later years based on the “change date.” The change date is the first day of the corporation's tax year beginning in 2003. Where this applies, complete Form 4626 taking into account the following modifications.
  • The adjustments for depreciation and amortization of pollution control facilities apply only to property placed in service on or after the change date.
  • The adjustment for mining exploration and development costs applies only to amounts paid or incurred on or after the change date.
  • The adjustment for long-term contracts applies only to contracts entered into on or after the change date.
  • When figuring the amount to enter on line 6, for any loss year beginning before the change date, use the corporation's regular tax NOL for that year.
  • Figure the limitation on line 4d only for prior tax years beginning on or after the change date.
  • Enter zero on line 2c of the Adjusted Current Earnings (ACE) Worksheet on page 11. When completing line 5 of the ACE Worksheet, take into account only amounts from tax years beginning on or after the change date. Also, for line 8 of the ACE Worksheet, take into account only property placed in service on or after the change date.

  See section 55(e)(3) for exceptions related to any item acquired in a corporate acquisition or to any substituted basis property, if an AMT provision applied to the item or property while it was held by the transferor.


Note:

Once the corporation loses its small corporation status, it cannot qualify for any subsequent tax year.

Credit for Prior Year Minimum Tax

A corporation may be able to take a minimum tax credit against the regular tax for AMT incurred in prior years. See Form 8827, Credit for Prior Year Minimum Tax—Corporations, for details.

Recordkeeping

Certain items of income, deductions, credits, etc., receive different tax treatment for the AMT than for the regular tax. Therefore, the corporation should keep adequate records to support items refigured for the AMT. Examples include:

  • Tax forms completed a second time to refigure the AMT;
  • The computation of a carryback or carryforward to other tax years of certain deductions or credits (e.g., net operating loss, capital loss, and foreign tax credit) if the AMT amount is different from the regular tax amount;
  • The computation of a carryforward of a passive loss or tax shelter farm activity loss if the AMT amount is different from the regular tax amount; and
  • A “running balance” of the excess of the corporation's total increases in alternative minimum taxable income (AMTI) from prior year adjusted current earnings (ACE) adjustments over the total reductions in AMTI from prior year ACE adjustments (see the instructions for line 4d on page 6).

Short Period Return

If the corporation is filing for a period of less than 12 months, AMTI must be annualized and the AMT prorated based on the number of months in the short period. Complete Form 4626 as follows.

  1. Complete lines 1 through 6 in the normal manner. Subtract line 6 from line 5 to figure AMTI for the short period, but do not enter it on line 7.
  2. Multiply AMTI for the short period by 12. Divide the result by the number of months in the short period. Enter this result on line 7 and write “Sec. 443(d)(1)” on the dotted line to the left of the entry space.
  3. Complete lines 8 through 11.
  4. Subtract line 11 from line 10. Multiply the result by the number of months in the short period and divide that result by 12. Enter the final result on line 12 and write “Sec. 443(d)(2)” on the dotted line to the left of the entry space.
  5. Complete the rest of the form in the normal manner.

Allocating Differently Treated Items Between Certain Entities and Their Investors

For a regulated investment company, a real estate investment trust, or a common trust fund, see section 59(d) for details on allocating certain differently treated items between the entity and its investors.

Optional Write-Off for Certain Expenditures

There is no AMT adjustment for the following items if the corporation elects to deduct them ratably over the period of time shown for the regular tax.

  • Circulation expenditures (personal holding companies)—3 years (section 173).
  • Mining exploration and development costs—10 years (sections 616(a) and 617(a)).
  • Intangible drilling costs—60 months (section 263(c)).

See section 59(e) for more details.

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