Professional Documents
Culture Documents
Chapter 15
Alternative Minimum Tax
I.
II.
General
A. AMT is separate (alternative), but parallel income tax system
B.
AMT computation reconciles Taxable Income with Alternative Minimum Taxable
Income (AMTI) through adjustments and preferences
Computing AMT - the formula:
Taxable Income
+/- Adjustments
+
Preferences
=
AMTI
Exemption
=
AMT tax base
x
AMT rate(s)
=
Tentative Minimum Tax (net of AMT Foreign Tax Credit)
Regular income tax (net of Foreign Tax Credit)
=
AMT
Regular
2011
2012
B.
Preferences
1.
Positive only
2.
Permanent - do not reverse themselves
Adjustment
AMT
IV.
Exemption Amounts
Individual Taxpayers
C Corporations
Single
Married, Joint
Married, Sep.
Initial Exemption
Phaseout
V.
$46,700
$70,950
$35,475
$40,000
AMT Rates
Individual Taxpayers
VI.
C Corporations
Flat 20%
C Corporations
1.
Small corporations are exempt.
a.
Small is defined as average annual gross receipts of less than $7.5
million for the 3-year period preceding the tax year. ($5m in the 1st 3
years of corporate life)
b.
Corporations are automatically classified as small in the 1st year of
existence.
C.
S Corporations?
Treatment under:
Regular Taxable Income
AMT
Expense immediately
Amortize over 3 years
Depreciation - Personalty
1987-1998 placed in
service
MACRS
10-yr. Write-offs:
Mining Exploration &
Development Costs;
Research & &
Experimental Expenditures
Expensed as incurred
SP - adjusted basis
NOLs
Operating loss, CB 2, CF 20
Post-1998 placed in
service
Post-1998 placed in
service
Post-1998 placed in
service
IX.
Item:
Incentive Stock Options
(ISOs)
Treatment under:
Regular Taxable Income
AMT
No income at exercise
Recognize income (FMV - cost)
when forfeiture provision expires
(or exercise if later). Basis is
increased for income recognized.
Itemized Deductions
casualty losses
charitable contributions
miscellaneous
phaseout (3% AGI >
certain amt.)
Standard deduction
Personal & dependency
exemptions
Other adjustments
Not allowed
Not allowed
X.
B.
1.
2.
3.
ACE adjustment can be + or -, but the negative adjustment is limited to the net
of the positive adjustments for prior years.
Transaction
Tax-exempt income (net of expenses)
Dividends received deduction (70% rule)
Key employee insurance proceeds
Intangible drilling costs deducted currently
Deferred gain on installment sales
Loss on sale between related parties
Net buildup on life insurance policy
LIFO recapture (LIFO > FIFO)
Exemption amount of $40,000
Federal income tax
Dividends received deduction (80% &
100% rules)
Excess capital losses
Disallowed travel & entertainment
expenses
Penalties and fines
Excess charitable contribution
Effect on
Unadjusted AMTI
in Arriving at ACE
Add
Add
Add
Add
Add
Subtract
Add
Add
Effect on Taxable
Income in Arriving
at E&P
Add
Add
Add
Add
Add
Subtract
Add
Add
No effect
No effect
No effect
No effect
Subtract
Add
No effect
No effect
Subtract
Subtract
No effect
No effect
Subtract
Subtract
XI.
Item:
Percentage Depletion
Exempt
Treatment under:
AMT
% depletion cannot exceed
basis. Add back any amounts
exceeding basis.
Preference for Excess IDC=
IDC incurred this yr.
- IDC / 10 yrs
- 65% of net oil/gas
income
Taxable
ADS (S/L), AMT lives
(longer)
Adjustment
AMT