REG 4 - Corporate AMT Flashcards
How can a C corporation be exempt from AMT? What qualified C corporation to be exempt from AMT?
- Smaller C corporations are exempt from AMT
- Small C corporation are considered to have annual average gross receipts of $7.5 million or less from the three previous periods.
How do you calculate AMT?
1) Start with regular taxable income
2) Add or minus ADJUSTMENT items to income
3) Add PREFERENCES items to increase income
3) ACE adjustments
How do you calculate adjustments? ALIE
The following are either added or subtracted:
A - Adjustments for gain/loss - when an asset is depreciated differently for calculating regular tax and AMT
L - Long-term contracts - when there is an adjustment needed for revenue calculated under the completed-contract method and revenue calculated under the percentage-of-completion method.
I - Installment sales-dealer - Installment method is not allowed for AMT. An adjustment is calculated for the difference between full accrual revenue and installment sales revenue.
E - Excess depreciation
How do you calculate preferences items? PPP
Preference items are ADDED back to increase income:
P - Percentage depletion
P - Private activity - issued post 1986 tax-exempt interest income
P - Pre 1987 ACRS excess depreciation
How do you calculate adjusted current earnings (ACE)?
MOLDD
Step 1:
M - Muncipal bond interest is added back
O- Organization expense amortization is added back
L- Life insurance proceeds on key employees are added back
D - Difference between AMT depreciation and ACE depreciation may need to be added back or subtracted from AMTI
D - Amount taken for 70% dividends-received deduction is added back
Step 2: The ACE adjustments are multipled by 75%
E.g. Maple Corp. has the following
Unadjusted AMTI - 50,000
Muncipal bond interest - 2,000
70% dividends received deduction - 3,000
Organization expense amortization - 1,500
Step 1: Add ACE adjustments: 2,000 + 3,000 + 1,500 = 6,500
Step 2: Multiple 6,500 x 75% = 4,875
What percentage is alternative tax net operating loss deduction (ATNOLD) limited to?
Limited to 90% of AMTI
How does a corporation calculate AMT exemption?
The exemption amount is $40,000 less 25% of AMTI in excess of $150,000.
E.g. Assume alternative minium taxable income is $210,000
Step 1: 210,000 - 150,000 = 60,000
Step 2: 60,000 x 25% = 15,000 (disallowed portion)
Step 3: 40,000 - 15,000 = 25,000 (allowed exemption)
What is the tax rate on alternative minimum taxable income?
Alternative minium taxable income is taxed at a flat 20%.
What is the only credit allowed for alternative minium tax?
Alternative minimum tax foreign tax credit (AMTFTC)
How long can you carry forward and carry back minimum tax credit (MTC)?
The AMT system in esscense is a credit (a corporation that pays AMT in one year may use this AMT as a credit in future years)
Credit against future regular tax - carried forward forever, not back.
