For facilities placed in service before 1999, figure the amortization deduction for the AMT using ADS (that is, the straight line method over the facility's class life). For facilities placed in service after 1998, figure the amortization deduction for the AMT under MACRS using the straight line method. Figure the AMT deduction using 100% of the asset's amortizable basis. Do not reduce the corporation's AMT basis by the 20% section 291 adjustment that applied for the regular tax.

Enter the difference between the AMT deduction and the regular tax deduction on line 2b. If the AMT deduction is more than the regular tax deduction, enter the difference as a negative amount.

For the AMT, the regular tax deductions under sections 616(a) and 617(a) are not allowed. Instead, capitalize these costs and amortize them ratably over a 10-year period beginning with the tax year in which the corporation paid or incurred them. The 10-year amortization applies to 100% of the mining development and exploration costs paid or incurred during the tax year. Do not reduce the corporation's AMT basis by the 30% section 291 adjustment that applied for the regular tax.

If the corporation had a loss on property for which mining exploration and development costs have not been fully amortized for the AMT, the 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.

Subtract the AMT deduction from the regular tax deduction. Enter the result on line 2c. If the AMT deduction is more than the regular tax deduction, enter the difference as a negative amount.

For the regular tax, circulation expenditures may be deducted in full when paid or incurred. For the AMT, these expenditures must be capitalized and amortized over 3 years beginning with the tax year in which the expenditures were made.

If the corporation had a loss on property for which circulation expenditures have not been fully amortized for the AMT, the AMT deduction is the smaller of (a) the loss allowable for the expenditures had they remained capitalized or (b) the remaining expenditures to be amortized for the AMT.

Subtract the AMT deduction from the regular tax deduction. Enter the result on line 2d. If the AMT deduction is more than the regular tax deduction, enter the difference as a negative amount.

If, during the tax year, the corporation disposed of property for which it is making (or previously made) any of the adjustments described on lines 2a through 2d above, refigure the property's adjusted basis for the AMT. Then refigure the gain or loss on the disposition.

The property's adjusted basis for the AMT is its cost minus all applicable depreciation or amortization deductions allowed for the AMT during the current tax year and previous tax years. Subtract this AMT basis from the sales price to get the AMT gain or loss.

Enter on line 2e the difference between the regular tax gain or loss and the AMT gain or loss. Enter the difference as a negative amount if any of the following apply.

For the AMT, the corporation generally must use the percentage-of-completion method described in section 460(b) to determine the taxable 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), determine the percentage of completion using the simplified procedures for allocating costs outlined in section 460(b)(3).

Subtract the regular tax income from the AMT income. Enter the difference on line 2f. If the AMT income is less than the regular tax income, enter the difference as a negative amount.

Amounts deposited in these funds are not deductible for the AMT. Earnings on these funds must be included in gross income for the AMT. If the corporation deducted these amounts or excluded them from income for the regular tax, add them back on line 2g.

This deduction is not allowed for the AMT. If the corporation took this deduction for the regular tax, add it back on line 2h.

Refigure all gains and losses reported for the regular tax from tax shelter farm activities by taking into account any AMT adjustments and preferences. Determine the AMT gain or loss using the rules for the regular tax with the following modifications.

Enter on line 2i the difference between the AMT gain or loss and the regular tax gain or loss. Enter the difference as a negative amount if the corporation had:

Refigure all passive activity gains and losses reported for the regular tax by taking into account the corporation's AMT adjustments and preferences and AMT prior year unallowed losses that apply to that activity.

Determine the corporation's AMT passive activity gain or loss using the same rules used for the regular tax. Generally, no loss is allowed. However, if the corporation is insolvent, losses are allowed to the extent the corporation is insolvent (see section 58(c)).

Disallowed losses of a personal service corporation are suspended until the corporation has income from that (or any other) passive activity or until the passive activity is disposed of (that is, its passive losses cannot offset “net active income” (defined in section 469(e)(2)(B) or “portfolio income”)). Disallowed losses of a closely held corporation that is not a personal service corporation are treated the same except that, in addition, they may be used to offset “net active income.”

Enter on line 2j the difference between the AMT gain or loss and the regular tax gain or loss. Enter the difference as a negative amount if the corporation had:

Refigure gains and losses reported for the regular tax from at-risk activities and the corporation's share of distributive items from partnerships by taking into account the corporation's AMT adjustments and preferences. If the corporation has recomputed losses that must be limited for the AMT by section 465 or section 704(d) or the corporation reported losses for the regular tax from at-risk activities or distributive shares of partnership losses that were limited by those sections, figure the difference between the loss limited for the AMT and the loss limited for the regular tax for each applicable at-risk activity or distributive share of partnership loss. “Loss limited” means the amount of loss that is not allowable for the year because of the limitations above.

Enter on line 2k the excess of the loss limited for the AMT over the loss limited for the regular tax. If the loss limited for the regular tax is more than the loss limited for the AMT, enter the difference as a negative amount.

Refigure depletion using 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, the depletion deduction for mines, wells, and other natural deposits is limited to the property's adjusted basis at the end of the year, as refigured for the AMT, unless the corporation is an independent producer or royalty owner claiming percentage depletion for oil and gas wells. Figure this limit separately for each property. When refiguring the property's adjusted basis, take into account any AMT adjustments the corporation made this year or in previous years that affect basis (other than the current year's depletion). Do not include in the property's adjusted basis any unrecovered costs of depreciable tangible property used to exploit the deposits (for example, machinery, tools, pipes, etc.).

For iron ore and coal (including lignite), apply the section 291 adjustment before figuring this preference.

Enter on line 2l the difference between the regular tax and the AMT deduction. If the AMT deduction is more than the regular tax deduction, enter the difference as a negative amount.

Enter on line 2m interest income from specified private activity bonds, reduced by any deduction that would have been allowable if the interest were includible in gross income for the regular tax. Generally, a specified private activity bond is any private activity bond (as defined in section 141) issued after August 7, 1986, on which the interest is not includible in gross income for the regular tax. See section 57(a)(5) for exceptions and details. Do not include interest on qualified Gulf Opportunity Zone bonds (described in section 1400N(a)) issued after December 21, 2005.

Intangible drilling costs (IDCs) from oil, gas, and geothermal properties are a preference to the extent excess IDCs exceed 65% of the net income from the properties. Figure the preference for all geothermal deposits separately from the preference for all oil and gas properties that are not geothermal deposits.

Enter the net amount of any other adjustments and preferences, including the following.

Accelerated depreciation of real property and certain leased personal property (pre-1987).   

This preference generally applies only to property placed in service after 1987, but depreciated using pre-1987 rules due to transition provisions of the Tax Reform Act of 1986.

  Refigure depreciation for the AMT using the straight line method for real property for which accelerated depreciation was determined for the regular tax using pre-1987 rules. Use a recovery period of 19 years for 19-year real property and 15 years for low-income housing property. Figure the excess of the regular tax depreciation over the AMT depreciation separately for each property and include only positive adjustments on line 2o.

  The adjustment for leased personal property only applies to personal holding companies. For leased personal property other than recovery property, enter the excess of the depreciation claimed for the property for the regular tax using pre-1987 rules over the depreciation allowable for the AMT as refigured using the straight line method.

  For leased 10-year recovery property and leased 15-year public utility property, enter the excess of the regular tax depreciation over 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 this amount separately for each property and include only positive adjustments on line 2o.

The corporation may elect to use a simplified section 904 limitation to figure its AMTFTC. The corporation must make the election for its first tax year beginning after 1997 for which it claims an AMTFTC. If it does not make the election for that tax year, it may not make the election for a later tax year. Once made, the election applies to all later tax years and may only be revoked with IRS consent.

If the corporation made the election for each of its AMT separate limitations, the corporation uses its separate limitation income or loss that it determined for the regular tax (instead of refiguring the separate limitation income or loss for the AMT, as described earlier).

If a corporation with a net unrealized built-in loss (within the meaning of section 382(h)) undergoes an ownership change (within the meaning of section 382(g) and Regulations section 1.56(g)-1(k)(2)), refigure the adjusted basis of each asset of the corporation (immediately after the ownership change). The new adjusted basis of each asset is its proportionate share (based on respective fair market values) of the fair market value of the corporation's assets (determined under section 382(h)) immediately before the ownership change.

To determine if the corporation has a net unrealized built-in loss immediately before an ownership change, use the aggregate adjusted basis of its assets used for figuring its ACE. Also, use these new adjusted bases for all future ACE calculations (such as depreciation and gain or loss on disposition of an asset).

Line 2. ACE Depreciation Adjustment

Line 2a. AMT depreciation.   Generally, the amount entered on this line is the depreciation the corporation claimed for the regular tax (Form 4562, line 22), modified by the AMT depreciation adjustments reported on lines 2a and 2o of Form 4626.

Line 2b(1). Post-1993 property.   For property placed in service after 1993, the ACE depreciation is the same as the AMT depreciation. Therefore, enter on line 2b(1) the same depreciation expense you included on line 2a of this worksheet for such property.

Line 2b(2). Post-1989, pre-1994 property.   For property placed in service in a tax year that began after 1989 and before 1994, use the ADS depreciation described in section 168(g). However, for property (a) placed in service in a tax year that began after 1989 and (b) described in sections 168(f)(1) through (4), use the same depreciation claimed for the regular tax and enter it on line 2b(5).

Line 2b(3). Pre-1990 MACRS property.   For MACRS property generally placed in service after 1986 and in a tax year that began before 1990, figure depreciation by using the property's AMT adjusted basis as of the close of the last tax year beginning before 1990 and by using the straight line method over the remainder of the recovery period for the property under ADS. In doing so, use the convention that would have applied to the property under section 168(d). For more information (including an example that illustrates the application of these rules), see Regulations section 1.56(g)-1(b)(2).

Line 2b(4). Pre-1990 original ACRS property.   For ACRS property generally placed in service in a tax year that began after 1980 and before 1987, figure depreciation by using the property's regular tax adjusted basis as of the close of the last tax year beginning before 1990 and by using the straight line method over the remainder of the recovery period for the property under ADS. In doing so, use the convention that would have applied to the property under section 168(d) (without regard to section 168(d)(3)). For more information (including an example that illustrates the application of these rules), see Regulations section 1.56(g)-1(b)(3).

Line 2b(5). Property described in sections 168(f)(1) through (4).   For this property, use the regular tax depreciation, regardless of when the property was placed in service.

  

Line 2b(5) takes priority over lines 2b(1), 2b(2), 2b(3), and 2b(4). For property that is described in sections 168(f)(1) through (4), use line 2b(5) instead of the line 2b(1), 2b(2), 2b(3), or 2b(4) that would otherwise apply.

Line 2b(6). Other property.   Use the regular tax depreciation for (a) property placed in service before 1981 and (b) property placed in service after 1980, in a tax year that began before 1990, that is excluded from MACRS by section 168(f)(5)(A)(i) or original ACRS by section 168(e)(4), as in effect before the Tax Reform Act of 1986.

Line 2c. Total ACE depreciation.   Subtract line 2b(7) from line 2a and enter the result on line 2c. If line 2b(7) exceeds line 2a, enter the difference as a negative amount.

Line 5. Other Adjustments

Line 5a.   Except as noted below, in figuring ACE, determine the deduction for intangible drilling costs under section 312(n)(2)(A).

  Subtract the ACE expense (if any) from the AMT expense (used to figure line 2n of Form 4626) and enter the result on line 5a. If the ACE expense exceeds the AMT amount, enter the result as a negative amount.

Exception.   The above rule does not apply to amounts paid or incurred for any oil or gas well by corporations that are independent producers (that is, not integrated oil companies as defined in section 291(b)(4)). If this exception applies, do not enter an amount on line 5a for oil and gas wells.

Line 5b.   When figuring ACE, the current year deduction for circulation expenditures under section 173 does not apply. Therefore, treat circulation expenditures for ACE using the case law that existed before section 173 was enacted.

   Subtract the ACE expense (if any) from the regular tax expense (for a personal holding company, from the AMT expense used to figure line 2d of Form 4626) and enter the result on line 5b. If the ACE expense exceeds the regular tax amount (for a personal holding company, the AMT amount), enter the result as a negative amount.

  

Do not make this adjustment for expenditures for which the corporation elected the optional 3-year write-off under section 59(e) for the regular tax.

Line 5c.   When figuring ACE, the amortization provisions of section 248 do not apply. Therefore, charge all organizational expenditures to a capital account and do not take them into account when figuring ACE until the corporation is sold or otherwise disposed of. Enter on line 5c all amortization deductions for organizational expenditures that were taken for the regular tax during the tax year.

Line 5d.   The adjustments provided in section 312(n)(4) apply in figuring ACE. See Regulations section 1.56(g)-1(f)(3).

Line 5e.   For any installment sale in a tax year that began after 1989, a corporation generally cannot use the installment method to figure ACE. However, it may use the installment method for the applicable percentage (as determined under section 453A) of the gain from any installment sale to which section 453A(a)(1) applies.

   Subtract the installment sale income reported for AMT from the ACE income from the sales and enter the result on line 5e. If the ACE income from the sales is less than the AMT amount, enter the difference as a negative amount.