| Instructions for Form 6251 |
2003 Tax Year |
Specific 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.
If you claim the standard deduction on Form 1040, you must also use the standard deduction in figuring the AMT. However, if
you owe AMT, you may be
able to lower your total tax (regular tax plus AMT) by itemizing deductions on Form 1040.
Part I—Alternative Minimum Taxable Income (AMTI)
To avoid duplication, any adjustment or preference for line 5, 18, or 19 or for a tax shelter farm activity on line 26 must
not be taken into
account in figuring the amount to enter for any other adjustment or preference.
If Form 1040, line 40, includes a write-in amount (such as a capital construction fund deduction for commercial fishermen),
adjust line 1 by the
write-in amount.
Do not include generation-skipping transfer taxes on income distributions.
Line 4—Certain Home Mortgage Interest
Include on this line home mortgage interest from line 10, 11, or 12 of Schedule A (Form 1040) except for interest on a mortgage whose
proceeds were used to:
- Buy, build, or substantially improve (a) your main home or (b) your second home that is a qualified dwelling (as
defined below) or
- Refinance a mortgage that meets the requirements of 1 above, but only to the extent that the refinanced amount did not exceed the
balance of that mortgage immediately before the refinancing.
Exception.
If the mortgage was taken out before July 1, 1982, do not include interest on the mortgage if it was secured by property that was your
main home or a qualified dwelling used by you or a member of your family at the time the mortgage was taken out. See section
56(e)(3).
A qualified dwelling is any house, apartment, condominium, or mobile home not used on a transient basis.
Include any refund from Form 1040, line 10, that is attributable to state or local income taxes deducted after 1986. Also
include any refunds
received in 2003 and included in income on Form 1040, line 21, that are attributable to state or local personal property taxes,
foreign income taxes,
or state, local, or foreign real property taxes deducted after 1986. If you include an amount from line 21, you must write a description
and the amount next to the entry space for line 7. For example, if you include a refund of real property taxes, write “real property” and the
amount next to the entry space.
Line 8—Investment Interest
If you filled out Form 4952, Investment Interest Expense Deduction, for your regular tax, you will need to fill out a second Form 4952
for the AMT as follows.
Step 1. Follow the Form 4952 instructions for line 1, but also include the following amounts when completing line 1.
- Any interest expense on line 4 of Form 6251 that was paid or accrued on indebtedness attributable to property held for investment
within the
meaning of section 163(d)(5) (for example, interest on a home equity loan whose proceeds were invested in stocks or bonds).
- Any interest that would have been deductible if interest earned on private activity bonds issued after August 7, 1986, had
been includible
in gross income.
Step 2. Enter your AMT disallowed investment interest expense from 2002 on line 2. Complete line 3.
Step 3. When completing Part II, refigure the following amounts, taking into account all adjustments and preferences.
- Gross income from property held for investment.
- Net gain from the disposition of property held for investment.
- Net capital gain from the disposition of property held for investment.
- Investment expenses.
Include any interest income and investment expenses from private activity bonds issued after August 7, 1986.
Step 4. Complete Part III.
Enter on line 8 the difference between line 8 of your AMT Form 4952 and line 8 of your regular tax Form 4952. If your AMT
expense is greater, enter
the difference as a negative amount.
Note:
If you did not itemize deductions and you had investment interest expense, do not enter an amount on Form 6251, line 8, unless
you reported
investment interest expense on Schedule E. If you did, follow the steps above for completing Form 4952. Allocate the investment
interest expense
allowed on line 8 of the AMT Form 4952 in the same way you did for the regular tax. Enter on Form 6251, line 8, the difference
between the amount
allowed on Schedule E for the regular tax and the amount allowed on Schedule E for the AMT.
You must refigure your depletion deduction for the AMT. To do so, use only income and deductions allowed for the AMT when
refiguring the limit
based on taxable income from the property under section 613(a) and the limit based on taxable income, with certain adjustments,
under section
613A(d)(1). Also, your depletion deduction for mines, wells, and other natural deposits under section 611 is limited to the
property's adjusted basis
at the end of the year, as refigured for the AMT, unless you are an independent producer or royalty owner claiming percentage
depletion for oil and
gas wells under section 613A(c). Figure this limit separately for each property. When refiguring the property's adjusted basis,
take into account any
AMT adjustments you made this year or in previous years that affect basis (other than current year depletion).
Enter the difference between the regular tax and AMT deduction. If the AMT deduction is greater, enter the difference as a
negative amount.
Line 11—Interest From Private Activity Bonds
Enter on line 11 interest you earned on “specified private activity bonds” reduced (but not below zero) by any deduction that would have been
allowable if the interest were includible in gross income for the regular tax. Generally, the term “specified private activity bond” means any
private activity bond (as defined in section 141) issued after August 7, 1986. See section 57(a)(5) for exceptions and more
details.
Exempt-interest dividends paid by a regulated investment company are treated as interest income on specified private activity
bonds to the extent
the dividends are attributable to interest on the bonds received by the company, minus an allocable share of the expenses
paid or incurred by the
company in earning the interest.
If you are filing Form 8814, Parents' Election To Report Child's Interest and Dividends, any tax-exempt interest income from line 1b of
that form that is a preference item must be included on this line.
Line 12—Qualified Small Business Stock
If you claimed the exclusion under section 1202 for gain on qualified small business stock held more than 5 years, compute
the amount to enter on
line 12 as follows.
- If you sold qualified small business stock before May 6, 2003, multiply the excluded gain (as shown on Schedule D (Form 1040))
by 42%
(.42).
- If you sold qualified small business stock after May 5, 2003, multiply the excluded gain (as shown on Schedule D (Form 1040))
by 7%
(.07).
Combine the results and enter on line 12 as a positive amount.
Line 13—Exercise of Incentive Stock Options
For the regular tax, no income is recognized when an incentive stock option (ISO), as defined in section 422(b), is exercised.
However, this rule
does not apply for the AMT. Instead, you generally must include on line 13 the excess, if any, of:
- The fair market value of the stock acquired through exercise of the option (determined without regard to any lapse restriction)
when your
rights in the acquired stock first become transferable or when these rights are no longer subject to a substantial risk of
forfeiture over
- The amount you paid for the stock, including any amount you paid for the ISO used to acquire the stock.
Note:
Even if your rights in the stock are not transferable and are subject to a substantial risk of forfeiture, you may elect to
include in AMT income
the excess of the stock's fair market value (determined without regard to any lapse restriction) over the exercise price upon
the transfer to you of
the stock acquired through exercise of the option. You must make the election by the 30th day after the date of the transfer.
See Pub. 525,
Taxable and Nontaxable Income, for more details.
If you acquired stock by exercising an ISO and you disposed of that stock in the same year, the tax treatment under the regular
tax and the AMT is
the same, and no adjustment is required.
Increase your AMT basis in any stock acquired through the exercise of an ISO by the amount of the adjustment. Keep adequate
records for both the
AMT and regular tax so that you may figure your adjustment. See the instructions for line 16.
Line 15—Large Partnerships
If you were a partner in an electing large partnership, enter the amount from Schedule K-1 (Form 1065-B), box 6. Take into
account any amount from
box 5 on Form 6251, line 18.
Line 16—Disposition of Property
Use this line to report any AMT adjustment related to the disposition of property resulting from refiguring:
- Gain or loss from the sale, exchange, or involuntary conversion of property reported on Form 4797, Sales of Business Property;
- Casualty gain or loss to business or income-producing property reported on Form 4684, Casualties and Thefts;
- Ordinary income from the disposition of property not already taken into account in 1 or 2 above or on any other line
on Form 6251, such as a disqualifying disposition of stock acquired in a prior year by exercising an incentive stock option;
and
- Capital gain or loss (including any carryover that is different for the AMT) reported on Schedule D (Form 1040), Capital Gains
and Losses.
The $3,000 capital loss limitation for the regular tax applies separately for the AMT. See the instructions and example below.
First figure any ordinary income adjustment related to 3 above. Then, refigure Form 4684, Form 4797, and Schedule D for the AMT, if
applicable, by taking into account any adjustments you made this year or in previous years that affect your basis or otherwise
result in a different
amount for the AMT. If you have a capital loss after refiguring Schedule D for the AMT, apply the $3,000 capital loss limitation
separately to the AMT
loss. For each of the four items listed above, figure the difference between the amount included in taxable income for the
regular tax and the amount
included in income for the AMT. Treat the difference as a negative amount if (a) both the AMT and regular tax amounts are zero or more and
the AMT amount is less than the regular tax amount or (b) the AMT amount is a loss, and the regular tax amount is a smaller loss or zero or
more.
Enter on line 16 the combined adjustments for the 4 items above.
Example.
On March 13, 2002, Victor Ash, whose filing status is single, paid $20,000 to exercise an incentive stock option (which was
granted to him on
January 2, 2001) to buy 200 shares of stock worth $200,000. The $180,000 difference between his cost and the value of the
stock at the time he
exercised the option is not taxable for the regular tax. His regular tax basis in the stock at the end of 2002 is $20,000.
For the AMT, however, Ash
must include the $180,000 as an adjustment on his 2002 Form 6251. His AMT basis in the stock at the end of 2002 is $200,000.
On January 20, 2003, Ash sold 100 of the shares for $75,000. Because Ash did not hold these shares more than 1 year, that
sale is a disqualifying
disposition. For the regular tax, Ash has ordinary income of $65,000 (proceeds minus his $10,000 basis in the 100 shares).
Ash has no capital gain or
loss for the regular tax resulting from the sale. For the AMT, Ash has no ordinary income, but has a short-term capital loss
of $25,000 (proceeds
minus his $100,000 AMT basis in the 100 shares).
On April 21, 2003, Ash sold the other 100 shares for $60,000. Because he held the shares for more than 1 year, the sale is
not a disqualifying
disposition. For the regular tax, Ash has a long-term capital gain of $50,000 (proceeds minus his regular tax basis of $10,000).
For the AMT, Ash has
a long-term capital loss of $40,000 (proceeds minus his AMT basis of $100,000).
Ash has no other sales of stock or other capital assets for 2003. Ash enters a total negative adjustment of $118,000 on line
16 of his 2003 Form
6251, figured as follows:
- Ash figures a negative adjustment of $65,000 for the difference between the $65,000 of regular tax ordinary income and the
$0 of AMT
ordinary income for the first sale.
- For the regular tax, Ash has $50,000 capital gain net income reported on Schedule D for the second sale. For the AMT, Ash
has a $25,000
short-term capital loss from the first sale, and a $40,000 long-term capital loss from the second sale, resulting in a net
capital loss of $65,000 for
the AMT. However, only $3,000 of the $65,000 net capital loss is allowed for 2003 for the AMT. The difference between the
regular tax Schedule D gain
of $50,000 and the $3,000 loss allowed for the AMT results in a $53,000 negative adjustment to include on line 16.
Ash has an AMT capital loss carryover from 2003 to 2004 of $62,000, of which $22,000 is short-term and $40,000 is long-term.
If he has no other
Schedule D transactions for 2004, his adjustment reported on line 16 of his 2004 Form 6251 would be limited to ($3,000), the
amount of his capital
loss limitation for 2004.
Line 17—Post-1986 Depreciation
This section describes when depreciation must be refigured for the AMT and how to figure the amount to enter on line 17.
Do not use line 17 for depreciation related to the following.
- Employee business expenses claimed on line 20 of Schedule A (Form 1040). Take this adjustment into account on line 5.
- Passive activities. Take this adjustment into account on line 18.
- An activity for which you are not at risk or income or loss from a partnership or an S corporation if the basis limitations
apply. Take this
adjustment into account on line 19.
- A tax shelter farm activity. Take this adjustment into account on line 26.
What Depreciation Must Be Refigured for the AMT?
Generally, you must refigure depreciation for the AMT, including depreciation allocable to inventory costs, for:
- Property placed in service after 1998 that is depreciated for the regular tax using the 200% declining balance method (generally
3-, 5-, 7-,
and 10-year property under the modified accelerated cost recovery system (MACRS), except for qualified property eligible for
the special depreciation
allowance (see page 4));
- Section 1250 property placed in service after 1998 that is not depreciated for the regular tax using the straight line method;
and
- Tangible property placed in service after 1986 and before 1999 (if the transitional election was made under section 203(a)(1)(B)
of the Tax
Reform Act of 1986, this rule applies to property placed in service after July 31, 1986).
What Depreciation Is Not Refigured for the AMT?
Do not refigure depreciation for the AMT for the following.
- Residential rental property placed in service after 1998.
- Nonresidential real property with a class life of 27.5 years or more placed in service after 1998 that is depreciated for
the regular tax
using the straight line method.
- Other section 1250 property placed in service after 1998 that is depreciated for the regular tax using the straight line method.
- Property (other than section 1250 property) placed in service after 1998 that is depreciated for the regular tax using the
150% declining
balance method or the straight line method.
- Property for which you elected to use the alternative depreciation system (ADS) of section 168(g) for the regular tax.
- Property that is qualified property under section 168(k)(2) or 168(k)(4) (property eligible for the special depreciation allowance).
The
special allowance is deductible for the AMT, and there also is no adjustment required for any depreciation figured on the
remaining basis of the
qualified property. Property for which an election is in effect under section 168(k)(2)(C)(iii) to not have the special allowance
apply is
not qualified property. See the Instructions for Form 4562 for the definition of qualified property.
- Any part of the cost of any property for which you made the election under section 179 to treat the cost of the property as
a deductible
expense. The reduction to the depreciable basis of section 179 property by the amount of the section 179 expense deduction
is the same for the regular
tax and the AMT.
- Motion picture films, videotapes, or sound recordings.
- Property depreciated under the unit-of-production method or any other method not expressed in a term of years.
- Qualified Indian reservation property.
- Qualified revitalization expenditures for a building for which you elected to claim the commercial revitalization deduction
under section
1400I.
How Is Depreciation Refigured for the AMT?
Property placed in service before 1999.
Refigure depreciation for the AMT using ADS, with the same convention used for the regular tax. See the table below
for the method and recovery
period to use.
Property placed in service after 1998.
Use the same convention and recovery period used for the regular tax. For property other than section 1250 property,
use the 150% declining balance
method, switching to straight line the first tax year it gives a larger deduction. For section 1250 property, use the straight
line method.
How Is the AMT Class Life Determined?
The class life used for the AMT is not necessarily the same as the recovery period used for the regular tax. The class lives
for the AMT are listed
in Rev. Proc. 87-56, 1987-2 C.B. 674, and in Pub. 946, How To Depreciate Property. Use 12 years for any tangible personal property not
assigned a class life.
See Pub. 946 for optional tables that may be used to figure AMT depreciation. Rev. Proc. 89-15, 1989-1 C.B. 816, has special
rules for short years
and for property disposed of before the end of the recovery period.
How Is the Adjustment Figured?
Subtract the AMT deduction for depreciation from the regular tax deduction and enter the result. If the AMT deduction is more
than the regular tax
deduction, enter the difference as a negative amount.
In addition to the AMT adjustment to your deduction for depreciation, you must also adjust the amount of depreciation that
was capitalized, if any,
to account for the difference between the rules for the regular tax and the AMT. Include on this line the current year adjustment
to taxable income,
if any, resulting from the difference.
Line 18—Passive Activities
Your passive activity gains and losses must be refigured for the AMT by taking into account all adjustments and preferences
and any AMT prior year
unallowed losses that apply to that activity. You may fill out a second Form 8582, Passive Activity Loss Limitations, and the other forms
or schedules on which your passive activities are reported, to determine your passive activity loss allowed for the AMT, but
do not file
the second set of forms and schedules with your tax return.
Example.
You are a partner in a partnership and the Schedule K-1 (Form 1065) you received shows the following.
- A passive activity loss of $4,125,
- A depreciation adjustment of $500 on post-1986 property, and
- An adjustment of $225 on the disposition of property.
Because the two adjustments above are not allowed for the AMT, you must first reduce the passive activity loss by those amounts.
The result is a
passive activity loss for the AMT of $3,400. You then enter this amount on the AMT Form 8582 and refigure the allowable passive
activity loss for the
AMT.
Note:
The amount of any AMT passive activity loss that is not deductible and is carried forward is likely to differ from the regular
tax amount, if any.
Therefore, keep adequate records for both the AMT and regular tax.
Enter the difference between the amount that would be reported for the activity on Schedule C, C-EZ, E, or F or Form 4835, Farm Rental
Income and Expenses, for the AMT and the regular tax amount. If (a) the AMT loss is more than the regular tax loss, (b) the AMT
gain is less than the regular tax gain, or (c) you have an AMT loss and a regular tax gain, enter the adjustment as a negative amount.
Enter any adjustment for amounts reported on Schedule D, Form 4684, or Form 4797 for the activity on line 16 instead of line
18. See the
instructions for line 16.
Publicly Traded Partnership (PTP)
If you had a loss from a PTP, refigure the loss using any AMT adjustments and preferences and any AMT prior year unallowed
loss.
Tax Shelter Passive Farm Activities
Refigure any gain or loss from a tax shelter passive farm activity taking into account all AMT adjustments and preferences
and any AMT prior year
unallowed losses. If the amount is a gain, include it on the AMT Form 8582. If the amount is a loss, do not include it on
the AMT Form 8582. Carry the
loss forward to 2004 to see if you have a gain or loss from tax shelter passive farm activities for 2004.
If at the end of the tax year your liabilities exceed the fair market value of your assets, increase your passive activity
loss allowed by that
excess (but not by more than your total loss). See section 58(c)(1).
For passive activities, see the line 18 instructions on this page instead. For tax shelter farm activities (that are not passive),
see the line 26
instructions beginning on page 5.
Refigure your gains and losses from activities for which you are not at risk and basis limitations applicable to partnerships
and S corporations by
taking into account all AMT adjustments and preferences that apply. See sections 59(h), 465, 704(d), and 1366(d).
Enter the difference between the amount that would be reported for the activity on Schedule C, C-EZ, E, or F or Form 4835
for the AMT and the
regular tax amount. If (a) the AMT loss is more than the regular tax loss, or (b) the AMT gain is less than the regular tax
gain, or (c) you have an AMT loss and a regular tax gain, enter the adjustment as a negative amount.
The AMT amount of any gain or loss from activities for which you are not at risk is likely to differ from the regular tax
amount. Your AMT basis in
partnerships and S corporations is also likely to differ from your regular tax basis. Therefore, keep adequate records for
both the AMT and regular
tax.
Enter any adjustment for amounts reported on Schedule D, Form 4684, or Form 4797 for the activity on line 16 instead.
Line 20—Circulation Costs
Note:
Do not make this adjustment for costs for which you elected the optional 3-year write-off for the regular tax.
Circulation costs (expenditures to establish, maintain, or increase the circulation of a newspaper, magazine, or other periodical)
deducted in full
for the regular tax in the year they were paid or incurred must be capitalized and amortized over 3 years for the AMT. Enter
the difference between
the regular tax and AMT deduction. If the AMT deduction is greater, enter the difference as a negative amount.
If you had a loss on property for which circulation costs have not been fully amortized for the AMT, your AMT deduction is
the smaller
of (a) the amount of the loss allowable for the costs had they remained capitalized or (b) the remaining costs to be amortized
for the AMT.
Line 21—Long-Term Contracts
For the AMT, you generally must use the percentage-of-completion method described in section 460(b) to determine your income
from any long-term
contract (defined in section 460(f)). However, this rule does not apply to any home construction contract (as defined in section
460(e)(6)). For
contracts excepted from the percentage-of-completion method for the regular tax by section 460(e)(1), you must use the simplified
procedures for
allocating costs outlined in section 460(b)(3) to determine the percentage of completion.
Enter the difference between the AMT and regular tax income. If the AMT income is smaller, enter the difference as a negative
amount.
Note:
If you are required to use the percentage-of-completion method for either the regular tax or the AMT, you may owe or be entitled
to a refund of
interest for the tax year the contract is completed or adjusted. For details, see Form 8697, Interest Computation Under the Look-Back
Method for Completed Long-Term Contracts.
Note:
Do not make this adjustment for costs for which you elected the optional 10-year write-off for the regular tax.
Mining exploration and development costs deducted in full for the regular tax in the tax year they were paid or incurred must
be capitalized and
amortized over 10 years for the AMT. Enter the difference between the regular tax and AMT deduction. If the AMT deduction
is greater, enter the
difference as a negative amount.
If you had a loss on property for which mining costs have not been fully amortized for the AMT, your AMT deduction is the
smaller of (a)
the loss allowable for the costs had they remained capitalized or (b) the remaining costs to be amortized for the AMT.
Line 23—Research and Experimental Costs
Note:
Do not make this adjustment for costs paid or incurred in connection with an activity in which you materially participated
under the passive
activity rules or for costs for which you elected the optional 10-year write-off for the regular tax.
Research and experimental costs deducted in full for the regular tax in the tax year they were paid or incurred must be capitalized
and amortized
over 10 years for the AMT. Enter the difference between the regular tax and AMT deduction. If the AMT deduction is greater,
enter the difference as a
negative amount.
If you had a loss on property for which research and experimental costs have not been fully amortized for the AMT, your AMT
deduction is the
smaller of (a) the loss allowable for the costs had they remained capitalized or (b) the remaining costs to be amortized for the
AMT.
Line 24—Installment Sales
The installment method does not apply for the AMT to any nondealer disposition of property after August 16, 1986, but before
January 1, 1987, if an
installment obligation to which the proportionate disallowance rule applied arose from the disposition. Enter on line 24 the
amount of installment
sale income reported for the regular tax.
Line 25—Intangible Drilling Costs (IDCs)
Note:
Do not make this adjustment for costs for which you elected the optional 60-month write-off for the regular tax.
IDCs from oil, gas, and geothermal wells are a preference to the extent that the excess IDCs exceed 65% of the net income
from the wells. Figure
the preference for all oil and gas properties separately from the preference for all geothermal properties.
Figure excess IDCs as follows.
Step 1. Determine the amount of your IDCs allowed for the regular tax under section 263(c), but do not include any section 263(c)
deduction for nonproductive wells.
Step 2. Subtract the amount that would have been allowed had you amortized these IDCs over a 120-month period starting with the month
the well was placed in production.
Note:
If you prefer not to use the 120-month period, you may elect to use any method that is permissible in determining cost depletion.
Determine net income by reducing the gross income that you received or accrued during the tax year from all oil, gas, and geothermal
wells by the deductions allocable to those wells (reduced by the excess IDCs). When refiguring net income, use only income
and deductions allowed for
the AMT.
Exception.
The preference for IDCs from oil and gas wells does not apply to taxpayers who are independent producers (that is,
not integrated oil companies as
defined in section 291(b)(4)). However, this benefit may be limited. First, figure the IDC preference as if this exception
did not apply. Then, for
purposes of this exception, complete Form 6251 through line 26, including the IDC preference, and combine lines 1 through
26. If the amount of the IDC
preference exceeds 40% of the total of lines 1 through 26, enter the excess on line 25 (your benefit from this exception is
limited). Otherwise, do
not enter an amount on line 25 (your benefit from this exception is not limited).
Line 26—Other Adjustments
Enter on line 26 the total of any other adjustments that apply to you, including the following.
Depreciation Figured Using Pre-1987 Rules
Note:
This preference generally only applies to property placed in service after 1987, but depreciated using pre-1987 rules due
to transitional
provisions of the Tax Reform Act of 1986.
For the AMT, you must use the straight line method to figure depreciation on real property for which accelerated depreciation
was determined using
pre-1987 rules. Use a recovery period of 19 years for 19-year real property and 15 years for low-income housing. For leased
personal property other
than recovery property, enter the amount by which your regular tax depreciation using the pre-1987 rules exceeds the depreciation
allowable using the
straight line method. For leased 10-year recovery property and leased 15-year public utility property, enter the amount by
which your regular tax
depreciation exceeds the depreciation allowable using the straight line method with a half-year convention, no salvage value,
and a recovery period of
15 years (22 years for 15-year public utility property).
Figure the excess of the regular tax depreciation over the AMT depreciation separately for each property and include on line
26 only positive
amounts.
Distributions you received from a cooperative may be includible in income. Unless the distributions are nontaxable, include
on line 26 the total
AMT patronage dividend adjustment reported to you by the cooperative.
Pollution Control Facilities
The section 169 election to amortize the basis of a certified pollution control facility over a 60-month period is not available
for the AMT. For
facilities placed in service before 1999, figure the AMT deduction using ADS. For facilities placed in service after 1998,
figure the AMT deduction
under MACRS using the straight line method. Enter the difference between the regular tax and AMT deduction. If the AMT amount
is greater, enter the
difference as a negative amount.
Tax Shelter Farm Activities
Figure this adjustment only if you have a gain or loss from a tax shelter farm activity (as defined in section 58(a)(2)) that
is not a
passive activity. If the activity is passive, you must include it with your other passive activities on line 18.
Refigure all gains and losses you reported for the regular tax from tax shelter farm activities by taking into account any
AMT adjustments and
preferences. Determine your tax shelter farm activity gain or loss for the AMT using the same rules you used for the regular
tax with the following
modifications. No refigured loss is allowed, except to the extent you are insolvent (see section 58(c)(1)). A refigured loss
may not be used in the
current tax year to offset gains from other tax shelter farm activities. Instead, any refigured loss must be suspended and
carried forward
indefinitely until (a) you have a gain in a subsequent tax year from that same activity or (b) you dispose of the activity.
Enter the difference between the amount that would be reported for the activity on Schedule E or F or Form 4835 for the AMT
and the regular tax
amount. If (a) the AMT loss is more than the regular tax loss, (b) the AMT gain is less than the regular tax gain, or (c)
you have an AMT loss and a regular tax gain, enter the adjustment as a negative amount.
Enter any adjustment for amounts reported on Schedule D, Form 4684, or Form 4797 for the activity on line 16 instead.
Charitable Contributions of Certain Property
If you made a charitable contribution of property to which section 170(e) applies and you had a different basis for AMT purposes,
you may have to
make an adjustment. See section 170(e) for details.
If your taxable income includes an amount from the alcohol fuel credit under section 87, include that amount as a negative
amount on line 26.
If you have an entry on line 8 because you deducted investment interest allocable to an interest in a trade or business, or
on line 9, 12, 13, or
15 through 25, or you have any amount included on line 26 from pre-1987 depreciation, patron's adjustment, pollution control
facilities, or tax
shelter farm activities, you may have to refigure any item of income or deduction based on a limit of income other than AGI or modified
AGI.
Affected items include the following.
- Section 179 expense deduction (Form 4562, line 12).
- Expenses for business or rental use of your home.
- Conservation expenses (Schedule F, line 14).
- Taxable IRA distributions (Form 1040, line 15b), if prior year IRA deductions were different for the AMT and the regular tax.
- Self-employed health insurance deduction (Form 1040, line 29).
- Self-employed SEP, SIMPLE, and qualified plans deduction (Form 1040, line 30).
- IRA deduction (Form 1040, line 24), affected by the earned income limitation of section 219(b)(1)(B).
Figure the difference between the AMT and regular tax amount for each item. Combine the amounts for all your related adjustments
and include the
total on line 26. Keep a copy of all computations for your records, including any AMT carryover and basis amounts.
Note:
Do not include on line 26 any adjustment for an item you refigured on another line of this form (for example, line 9).
Example.
On your Schedule C (Form 1040) you have a net profit of $9,000 before figuring your section 179 deduction (and you do not
report any other business
income on your return). During the year, you purchased an asset for $10,000 for which you elect to take the section 179 deduction.
You also have an
AMT depreciation adjustment of $700 for other assets depreciated on your Schedule C.
Your section 179 deduction for the regular tax is limited to your net profit (before any section 179 deduction) of $9,000.
The $1,000 excess is a
section 179 deduction carryforward for the regular tax.
For the AMT, your net profit is $9,700, and you are allowed a section 179 deduction of $9,700 for the AMT. You have a section
179 deduction
carryforward of $300 for the AMT.
You include a $700 negative adjustment on line 26 because your section 179 deduction for the AMT is $700 greater than your
allowable regular tax
deduction. In the following year, when you use the $1,000 regular tax carryforward, you will have a $700 positive related
adjustment for the AMT
because your AMT carryforward is only $300.
Line 27—Alternative Tax Net Operating Loss Deduction (ATNOLD)
The ATNOLD is the sum of the alternative tax net operating loss (ATNOL) carryovers and carrybacks to the tax year, subject
to the limitation
explained below. Figure your ATNOLD as follows.
Your ATNOL for a loss year is the excess of the deductions allowed for figuring AMTI (excluding the ATNOLD) over the income
included in AMTI.
Figure this excess with the modifications in section 172(d), taking into account the adjustments in sections 56 and 58 and
preferences in section 57
(that is, the section 172(d) modifications must be separately figured for the ATNOL). For example, the limitation of nonbusiness
deductions to the
amount of nonbusiness income must be separately figured for the ATNOL, using only nonbusiness income and deductions that are
included in AMTI.
Your ATNOLD may be limited. To figure the ATNOLD limitation, you must first figure your AMTI without regard to the ATNOLD.
To do this, first figure
a tentative amount for line 9 by treating line 27 as if it were zero. Next, figure a tentative total of lines 1 through 26
using the tentative line 9
amount and treating line 27 as if it were zero. Your ATNOLD limitation is 90% of this tentative total.
Enter on line 27 the smaller of the ATNOLD or the ATNOLD limitation.
Any ATNOL not used may be carried back 2 years or forward up to 20 years (15 years for loss years beginning before 1998).
In some cases, the
carryback period is longer than 2 years; see section 172(b) for details. The treatment of ATNOLs does not affect your regular
tax NOL.
Note:
If you elected under section 172(b)(3) to forego the carryback period for the regular tax, the election also applies for the
AMT.
Line 28—Alternative Minimum Taxable Income
If your filing status is married filing separately and line 28 is more than $191,000, you must include an additional amount
on line 28. If line 28
is $307,000 or more, include an additional $29,000. Otherwise, include 25% of the excess of the amount on line 28 over $191,000.
For example, if the
amount on line 28 is $211,000, enter $216,000 instead—the additional $5,000 is 25% of $20,000 ($211,000 minus $191,000).
Special Rule for Holders of a Residual Interest in a REMIC
If you held a residual interest in a real estate mortgage investment conduit (REMIC) in 2003, the amount you enter on line
28 may not be less than
the amount on Schedule E, line 38, column (c). If the amount in column (c) is larger than the amount you would otherwise enter
on line 28, enter the
amount from column (c) instead and write “Sch. Q” on the dotted line next to line 28.
Part II—Alternative Minimum Tax
If line 28 is more than the amount shown for your filing status in the middle column of the chart on line 29, see the worksheet
on this page to
figure the amount to enter on line 29.
If this form is for a child under age 14, complete the worksheet on this page. A child under age 14 is a child who was born after
January 1, 1990, and at least one of whose parents was alive at the end of 2003.
Line 8 of the worksheet.
Earned income includes wages, tips, and other amounts received for personal services performed. If the child is engaged
as a sole proprietor or as
a partner in a trade or business in which both personal services and capital are material income-producing factors, earned
income also includes a
reasonable allowance for compensation for personal services rendered by the child, but not more than 30% of his or her share
of the net profits from
that trade or business (after subtracting the deduction for one-half of self-employment tax). However, the 30% limit does
not apply if there are no
net profits from the trade or business. If capital is not an income-producing factor and the child's personal services produced
the business income,
all of the child's gross income from the trade or business is considered earned income.
Line 32—Alternative Minimum Tax Foreign Tax Credit (AMTFTC)
To see if you need to figure your AMTFTC, fill in line 34 of Form 6251 as instructed (you will first need to figure your foreign
tax credit for the
regular tax and complete Form 1040, line 44). If the amount on line 34 is greater than or equal to the amount on line 31,
you do not owe the AMT.
Enter zero on line 35 and see Who Must File on page 1 to find out if you must attach Form 6251 to your return. However, even if you do not
owe the AMT, you may need to complete line 32 to see if you have an AMTFTC carryback or carryforward to other tax years.
Your AMTFTC is your foreign tax credit refigured as follows.
- Use a separate AMT Form 1116 for each separate limitation category specified at the top of Form 1116. Write “AMT” in the top margin of
each Form 1116.
Note:
When applying the separate limitation categories, use the applicable AMT rate instead of the regular tax rate to determine
if any income is
“high-taxed.”
- If you previously made or are making the simplified limitation election (see page 8), skip Part I and enter on the AMT Form 1116,
line 16, the same amount you entered on that line for the regular tax. If you did not complete Form 1116 for the regular tax
and you previously made
or are making the simplified limitation election, complete Part I and lines 14 through 16 of the AMT Form 1116 using regular
tax amounts.
If the election does not apply, complete Part I using only income and deductions that are allowed for the AMT and attributable
to sources outside
the United States. If required by the Instructions for Form 1116 (based on your AMT Schedule D), complete Worksheet A, Worksheet
B, and the Worksheet
for Line 17 for the AMT. (But, if required, make adjustments to your foreign source capital gains and losses using the instructions
in Pub.
514, Foreign Tax Credit for Individuals, instead of completing Worksheets A and B.) If you are required to complete an AMT Worksheet
for Line
17, follow the instructions under 5 beginning below.
- Complete Part II and lines 9 through 13 of the AMT Form 1116. Use your AMTFTC carryover, if any, on line 10.
- If the simplified limitation election does not apply, complete lines 14 through 16 of the AMT Form 1116.
- If you did not complete Schedule D (Form 1040) for the regular tax and did not complete Part III of Form 6251, enter the AMTI
from Form
6251, line 28, on line 17 of the AMT Form 1116 and go to 6 below. Otherwise, follow these steps to complete, for the AMT, the Worksheet for
Line 17 in the Form 1116 instructions.
- Enter the amount from Form 6251, line 28, on line 1 of the AMT Worksheet for Line 17.
- Complete a Schedule D for the AMT as explained in the instructions for lines 37, 38, 39, 43, and 46 on page 8 (or, if you
already completed
an AMT Schedule D to complete Part III of Form 6251, use that Schedule D). Next, enter the amount from Form 6251, line 30,
on line 21 of your AMT
Schedule D or line 1 of the AMT Schedule D Tax Worksheet. Then, complete lines 27 through 48 of the AMT Schedule D (you may
skip lines 33, 37, 39, and
47) or lines 14 through 46 of the AMT Schedule D Tax Worksheet (you may skip lines 22, 26, 28, 36, 38, and 44).
- Complete the rest of the AMT Worksheet for Line 17 using amounts from the AMT Schedule D or AMT Schedule D Tax Worksheet.
- Enter the amount from Form 6251, line 31, on the AMT Form 1116, line 19. Complete lines 18, 20, and 21 of the AMT Form 1116.
- Complete Part IV of the first AMT Form 1116 only.
Follow the instructions below to figure the amount to enter on Form 6251, line 32.
If you have no entry on Form 6251, line 27, and no intangible drilling costs (IDCs) (or the exception for IDCs does not apply
to you—see the
instructions for line 25 on page 5), enter on Form 6251, line 32, the smaller of:
- 90% of Form 6251, line 31, or
- The amount from line 33 of the first AMT Form 1116.
If you have an entry on line 27 or the exception for IDCs applies to you:
- Figure the amount of tax that would be on line 31 if line 27 were zero and the exception did not apply,
- Multiply the amount from 1 above by 10%,
- Subtract the amount from 2 above from the tax on line 31, and
- Enter on Form 6251, line 32, the smaller of the amount from 3 above or the amount from line 33 of the first AMT Form
1116.
Attach to your tax return, after Form 6251, all AMT Forms 1116 you used to figure your AMTFTC.
AMTFTC Carryback and Carryforward
If your AMTFTC is limited, the unused amount may be carried back or forward according to sections 59(a)(2)(B) and 904(c).
Simplified Limitation Election
You may elect to use a simplified section 904 limitation to figure your AMTFTC. If you do, use your regular tax income for
Form 1116, Part I,
instead of refiguring your foreign source income for the AMT, as described earlier. You must make the election for the first
tax year after 1997 for
which you claim an AMTFTC. If you do not make the election for that year, you may not make it for a later year. Once made,
the election applies to all
later tax years and may be revoked only with IRS consent.
Part III—Tax Computation Using Maximum Capital Gains Rates
Lines 37, 38, 39, 43, and 46
If you did not complete Schedule D (Form 1040) but you figured your tax using the Qualified Dividends and Capital Gain Tax
Worksheet in the instructions for line 41 of Form 1040, then:
- Enter on Form 6251, lines 37 and 39, the amount from line 6 of that worksheet;
- Skip Form 6251, line 38;
- Enter on Form 6251, line 43, the amount, if any, from line 10 of the worksheet; and
- Enter on Form 6251, line 46, the amount, if any, from line 11 of the worksheet.
If you did complete Schedule D, you generally may use the amounts from Schedule D or the Schedule D Tax Worksheet as instructed
on Form 6251, lines
37, 38, 39, and 46. But do not use those amounts if either of the following applies.
- Any gain or loss on Schedule D is different for the AMT (for example, because of a different basis for the AMT due to depreciation
adjustments, an incentive stock option adjustment, or a different AMT capital loss carryover from 2002).
- You did not complete Part IV of Schedule D because Form 1040, line 40, is zero.
If 1 or 2 above applies, complete a Schedule D for the AMT as follows. If 1 applies, refigure the amounts for
Schedule D, Parts I, II, and III for the AMT; otherwise, use the regular tax amounts. Next, complete lines 19, 22 through
26, and 31 of the AMT
Schedule D (or lines 2 through 13, plus line 20, of an AMT Schedule D Tax Worksheet, if applicable). Use amounts from the
AMT Schedule D or AMT
Schedule D Tax Worksheet to complete lines 37, 38, 39, and 46 of Form 6251. Keep the AMT Schedule D and worksheet for your
records, but do
not attach the AMT Schedule D to your tax return.
If you did not complete line 30 of Schedule D for the regular tax (or line 19 of the Schedule D Tax Worksheet, if applicable),
enter zero on Form
6251, line 43.
Note:
Do not decrease your section 1202 exclusion by the amount, if any, on line 12.
Generally, you may enter the amount, if any, from Schedule D, line 35, on Form 6251, line 50. However, if your qualified 5-year
gain is different
for the AMT (for example, because of a different basis), you must complete an AMT Qualified 5-Year Gain Worksheet (on page D-10 of the
Schedule D instructions). If the amount on any line of the worksheet is different for the AMT, use the AMT amount instead
of the regular tax amount.
Enter the amount from line 8 of that worksheet on Form 6251, line 50.
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