U. S. Business Income Tax return

2013

Department of the Treasury
Internal Revenue Service

Instructions for Form 4626
Alternative Minimum Tax—Corporations
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments to Form 4626 and its
instructions, such as legislation enacted
after they were published, go to
www.irs.gov/form4626.

General Instructions
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.

Consolidated returns. 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

Generally, file Form 4626 if any of the
following apply.
The corporation is not a “small
corporation” exempt from the AMT (as
explained below).
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.
The corporation claims any general
business credit, any qualified electric
vehicle passive activity credit from prior
years, 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
current tax year:
1. The current year is the
corporation's first tax year in existence
(regardless of its gross receipts for the
year), or
2. Both of the following apply.
a. It was treated as a small
corporation exempt from the AMT for all
prior tax years beginning after 1997.

Nov 13, 2013

b. Its average annual gross receipts
for all 3-tax-year periods (or portions
thereof during which the corporation
was in existence) ending before its
current tax year did not exceed $7.5
million ($5 million for the corporation's
first 3-tax-year period. See section
55(e)).
The following rules apply when
figuring gross receipts under 2b 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 current tax
year, it loses its AMT exemption status.
Special rules apply in figuring AMT for
the tax year beginning on the “change
date.” The change date is the first day of
the corporation's tax year for which the
corporation ceased to be a small
corporation. 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
Cat. No. 64443L

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.
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.
Note. No additional modification in
figuring AMT is required for exceptions
related to any item acquired in a
corporate acquisition under section 381
or to any substituted basis property, if
any of the AMT adjustment
modifications listed earlier applied to the
item or property while it was held by the
transferor.
Once the corporation loses its
small corporation status, it
CAUTION
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 used for regular tax
purposes that are completed a second
time to refigure items of income,
deductions, etc., for the AMT;
The computation of a carryback or
carryforward to other tax years of
certain deductions or credits (for
example, 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).

Short Period Return

If the corporation is filing for a period of
less than 12 months, AMTI must be
annualized and the tentative minimum
tax 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 only)—3 years.

Mining exploration and development
costs—10 years.
Intangible drilling costs—60 months.
See section 59(e) for more details.

Specific Instructions
Line 1. Taxable Income or
(Loss) Before Net
Operating Loss Deduction

Enter the corporation's taxable income
or (loss) before the NOL deduction,
after the special deductions, and without
regard to any excess inclusion (for
example, if filing Form 1120, subtract
line 29b from line 28 of that form).

Line 2. Adjustments and
Preferences
To avoid duplication, do not
include any AMT adjustment or
CAUTION
preference taken into account
on line 2i, 2j, 2k, or 2o in the amounts to
be entered on any other line of this form.

!

Line 2a. Depreciation of
Post-1986 Property
What Adjustments Are Not
Included As Depreciation
Adjustments?
Do not make a depreciation adjustment
on line 2a for:
A tax shelter farm activity. Take this
adjustment into account on line 2i.
Passive activities. Take this
adjustment into account on line 2j.
An activity for which the corporation is
not at risk, or income or loss from a
partnership interest, or stock in an S
corporation if the basis limitations apply.
Take this adjustment into account on
line 2k.

What Depreciation Must Be
Refigured for the AMT?
Generally, the corporation must refigure
depreciation for the AMT, including
depreciation allocable to inventory
costs, for the following.
Property placed in service after 1998
depreciated for the regular tax using the
200% declining balance method
(generally 3-, 5-, 7-, or 10-year property
under the modified accelerated cost
recovery system (MACRS)), except for
qualified property eligible for the special
depreciation allowance.
Section 1250 property placed in
service after 1998 that is not
depreciated for the regular tax using the
straight line method.
-2-

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
(generally, a building and its structural
components) 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 the corporation
elected to use the alternative
depreciation system (ADS) for the
regular tax.
Any qualified property eligible for a
special depreciation allowance if the
depreciable basis of the property for the
AMT is the same as for the regular tax.
In addition, no adjustment is required for
any depreciation figured on the
remaining basis of the qualified
property. However, if an election is in
effect to not have the special allowance
apply, the corporation must refigure
depreciation for the AMT.
Any part of the cost of any property
that the corporation elected to expense
under section 179. 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.
Certain public utility property (if a
normalization method of accounting is
not used), motion picture films and
video tape, sound recordings, and
property that the corporation elects to
exclude from MACRS by using a
depreciation method that is not based
on a term of years, such as the
unit-of-production method.
Any qualified Indian reservation
property. See section 168(j)(3).
Any natural gas gathering line (as
defined in section 168(i)(17)) placed in
service after April 11, 2005, the original
use of which begins with the corporation

after April 11, 2005, and which is not
under self-construction or subject to a
binding contract in existence before
April 12, 2005.

How Is Depreciation Refigured for
the AMT?
Property placed in service after
1998. Use the same convention and
recovery period used for the regular tax.
Use the straight line method for section
1250 property. For property other than
section 1250 property, use the 150%
declining balance method, switching to
the straight line method the first tax year
it gives a larger deduction.
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 Before
1999
IF the property is

. .

THEN use the .

. . . .

Section 1250 property. Straight line method
over 40 years.
Tangible property
Straight line method
(other than section
over the property's
1250 property)
AMT class life.
depreciated using the
straight line method for
the regular tax.
Any other tangible
property.

150% declining
balance method,
switching to the
straight line method
the first tax year it
gives a larger
deduction, over the
property's AMT class
life.

How is the AMT class life
determined? For property placed in
service before 1999, the class life used
for the AMT is not necessarily the same
as the recovery period used for the
regular tax.
The class lives are listed in Rev.
Proc. 87-56, 1987-2 C.B. 674, Rev.
Proc. 88-22, 1988-1 C.B. 785, and in
Pub. 946, How To Depreciate Property.
See Pub. 946 for tables that
TIP can be used to figure AMT
depreciation. Rev. Proc. 89-15,
1989-1 C.B. 816, and Pub. 946 have
special rules for short tax years and for
property disposed of before the end of
the recovery period.

How Is the Line 2a Adjustment
Figured?
Subtract the AMT deduction for
depreciation from the regular tax
deduction and enter the result on
line 2a. 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
the deduction for depreciation, 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 2b. Amortization of
Certified Pollution Control
Facilities

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.

Line 2c. Amortization of Mining
Exploration and Development
Costs
Do not make this adjustment
for costs for which the
CAUTION
corporation elected the optional
10-year write-off for the regular tax.

!

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
-3-

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.

Line 2d. Amortization of
Circulation Expenditures
Complete this line only if the
corporation is a personal
CAUTION
holding company. Do not make
this adjustment for expenditures of a
personal holding company for which the
company elected the optional 3-year
write-off for the regular tax.

!

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.

Line 2e. Adjusted Gain or Loss

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.

Dispositions for which line 2i, 2j, and
2k adjustments are made. The
corporation may also have gains or

losses from lines 2i, 2j, and 2k that must
be considered on line 2e. For example,
if for the regular tax the corporation
reports a loss from the disposition of an
asset used in a passive activity, include
the loss in the computations for line 2j to
determine if any passive activity loss is
limited for the AMT. Then, include the
AMT passive activity loss allowed that
relates to the disposition of the asset on
line 2e in determining the corporation's
AMT basis adjustment. It may be helpful
to refigure the following for the AMT:
Form 8810, Corporate Passive Activity
Loss and Credit Limitations, and related
worksheets, Schedule D (Form 1120),
Capital Gains and Losses, Section B of
Form 4684, Casualties and Thefts, or
Form 4797, Sale of Business Property.
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.
The AMT gain is less than the regular
tax gain.
The AMT loss exceeds the regular
tax loss.
The corporation has an AMT loss and
a regular tax gain.

Line 2f. Long-Term Contracts

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.

Line 2g. Merchant Marine
Capital Construction Funds

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.

Line 2h. Section 833(b)
Deduction

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

Line 2i. Tax Shelter Farm
Activities
Complete this line only if the
corporation is a personal
CAUTION
service corporation and it has a
gain or loss from a tax shelter farm
activity that is not a passive activity. If
the tax shelter farm activity is a passive
activity, include the gain or loss in the
computations for line 2j.

!

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.
No loss is allowed except to the
extent the personal service corporation
is insolvent.
Do not use a loss in the current tax
year to offset gains from other tax
shelter farm activities. Instead, suspend
any loss and carry it forward indefinitely
until the corporation has a gain in a
subsequent tax year from that same tax
shelter farm activity or it disposes of the
activity.
Keep adequate records for
losses that are not deductible
(and therefore carried forward)
for both the AMT and regular tax.

TIP

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:
An AMT loss and a regular tax gain,
An AMT loss that exceeds the regular
tax loss, or
A regular tax gain that exceeds the
AMT gain.

Line 2j. Passive Activities

!

CAUTION

This adjustment applies only to
closely held corporations and
personal service corporations.

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
-4-

same rules used for the regular tax.
Generally, no loss is allowed. However,
if the corporation is insolvent, special
rules apply. 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.”
Keep adequate records for
losses that are not deductible
(and therefore carried forward)
for both the AMT and regular tax.

TIP

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:
An AMT loss and a regular tax gain,
An AMT loss that exceeds the regular
tax loss, or
A regular tax gain that exceeds the
AMT gain.

Tax Shelter Farm Activities That
Are Passive Activities
Refigure all 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.
Use the same rules as outlined
above for other passive activities, with
the following modifications.
AMT gains from tax shelter farm
activities that are passive activities may
be used to offset AMT losses from other
passive activities.
AMT losses from tax shelter farm
activities that are passive activities may
not be used to offset AMT gains from
other passive activities. These losses
must be suspended and carried forward
indefinitely until the corporation has a
gain in a subsequent year from that
same activity or it disposes of the
activity.

Line 2k. Loss Limitations

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.

Line 2l. Depletion

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.

Line 2m. Tax-Exempt Interest
Income From Specified Private
Activity Bonds

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. Specified private activity
bonds do not include:
Qualified 501(c)(3) bonds;
Certain housing bonds issued after
July 30, 2008; and
Bonds issued in 2009 and 2010.
See section 57(a)(5)(C) for more
information and other exceptions.
Do not include interest on qualified
Gulf Opportunity Zone bonds or
qualified Midwestern disaster area
bonds.

Line 2n. Intangible Drilling
Costs
Do not make this adjustment
for costs for which the
CAUTION
corporation elected the optional
60-month write-off for the regular tax.

!

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.
Excess IDCs. Excess IDCs are the
excess of:
The amount of IDCs the corporation
paid or incurred for oil, gas, or
geothermal properties that it elected to
expense for the regular tax (not
including any IDCs paid or incurred for
nonproductive wells) reduced by the
section 291(b)(1) adjustment for
integrated oil companies and increased
by any IDCs allowed to be amortized
under section 291(b)(2) over
The amount that would have been
allowed if the corporation had amortized
that amount over a 120-month period
starting with the month the well was
placed in production or, alternatively,
had elected any method that is
permissible in determining cost
depletion.
Net income from oil, gas, and geothermal properties. Net income is the
gross income the corporation received
or accrued from all oil, gas, and
geothermal wells minus the deductions
allocable to these properties (reduced
by the excess IDCs). When refiguring
net income, use only income and
deductions allowed for the AMT.
-5-

Exception. The preference for IDCs
from oil and gas wells does not apply to
corporations that 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
a second Form 4626 through line 5,
including the IDC preference. If the
amount of the IDC preference exceeds
40% of the amount figured for line 5,
enter the excess on line 2n (the benefit
of this exception is limited). If the
amount of the IDC preference is equal
to or less than 40% of the amount
figured for line 5, do not include an
amount on line 2n for oil and gas wells
(the benefit of this exception is not
limited).

Line 2o. Other Adjustments
And Preferences

Enter the net amount of any other
adjustments and preferences, including
the following.
Income eligible for the American Samoa economic development credit.
If this income was included in the
corporation's taxable income for the
regular tax, include this amount on
line 2o as a negative amount.
Income from the biofuel producer,
biodiesel, and renewable diesel
fuels credits. If this income was
included in the corporation's income for
the regular tax, include this amount on
line 2o as a negative amount.
Income as the beneficiary of an estate or trust. If the corporation is the
beneficiary of an estate or trust, include
on line 2o the AMT adjustment from
Schedule K-1 (Form 1041), Part III,
box 12.
Net AMT adjustment from an electing large partnership. If the
corporation is a partner in an electing
large partnership, include on line 2o the
amount from Schedule K-1 (Form
1065-B), box 6. Also include on line 2o
any amount from Schedule K-1 (Form
1065-B), box 5, unless the corporation
is a closely held or personal service
corporation. Closely held and personal
service corporations should take any
amount from box 5 into account when
figuring the amount to enter on line 2j.
Patron's AMT adjustment.
Distributions the corporation received
from a cooperative may be includible in
income. Unless the distributions are
nontaxable, include on line 2o the total
AMT patronage dividend adjustment

reported to the corporation from the
cooperative.
Cooperative's AMT adjustment. If the
corporation is a cooperative, refigure
the cooperative's deduction for
patronage dividends by taking into
account the cooperative's AMT
adjustments and preferences. Subtract
the cooperative's AMT deduction for
patronage dividends from its regular tax
deduction for patronage dividends and
include the result on line 2o. If the AMT
deduction is more than the regular tax
deduction, include the result as a
negative amount.
Domestic production activities deduction. For the AMT, figure the
corporation's domestic production
activities deduction under section 199
without taking into account any AMT
adjustments and preferences. The
section 199 deduction for the
corporation's AMT is 9% of the smaller
of (a) the qualified production activities
income or (b) the alternative minimum
taxable income (AMTI), determined
without taking into account the section
199 deduction. Subtract the
corporation's AMT section 199
deduction from its regular tax section
199 deduction and include the result on
line 2o. If the AMT deduction is more
than the regular tax deduction, include
the result as a negative amount.
Installment sales. The installment
method does not apply for the AMT to
any nondealer disposition of property
that occurred after August 16, 1986, but
before the first day of the corporation's
tax year that began in 1987, if an
installment obligation to which the
proportionate disallowance rule applied
arose from the disposition. Include as a
negative adjustment on line 2o the
amount of installment sale income
reported for the regular tax.
Accelerated depreciation of real
property and certain leased personal property (pre-1987). 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.
This preference generally
applies only to property placed
CAUTION
in service after 1987, but
depreciated using pre-1987 rules due to
transition provisions of the Tax Reform
Act of 1986.

!

Related adjustments. AMT
adjustments and preferences may affect
deductions that are based on an income
limit (for example, charitable
contributions). Refigure these
deductions using the income limit as
modified for the AMT. Include on line 2o
an adjustment for the difference
between the regular tax and AMT
amounts for all such deductions. If the
AMT deduction is more than the regular
tax deduction, include the difference as
a negative amount.

Line 4. Adjusted Current
Earnings (ACE)
Adjustment
The ACE adjustment does not
apply to a regulated investment
CAUTION
company or a real estate
investment trust. Also, for an affiliated
group filing a consolidated return under
the rules of section 1501, figure line 4b
on a consolidated basis.

!

Line 4b. The following examples
illustrate the manner in which line 3 is
subtracted from line 4a to get the
amount to enter on line 4b.
Example 1. Corporation A has line 4a
ACE of $25,000. If Corporation A has
line 3 pre-adjustment AMTI in the
amounts shown below, its line 3 and
line 4a amounts would be combined as
follows to determine the amount to enter
on line 4b.

-6-

Line 4a ACE

$25,000 $25,000

Line 3 pre-adj.
AMTI
Amount to
enter
on line 4b

10,000

$25,000

30,000

(50,000)

$15,000 $(5,000)

$75,000

Example 2. Corporation B has line 4a
ACE of $(25,000). If Corporation B has
line 3 pre-adjustment AMTI in the
amounts shown below, its line 3 and
line 4a amounts would be combined as
follows to determine the amount to enter
on line 4b.
Line 4a
ACE
Line 3
pre-adj.
AMTI

$(25,000) $(25,000)

$(25,000)

(10,000)

(30,000)

50,000

Amount to
enter
on line 4b $(15,000)

$5,000

$(75,000)

Line 4d. A potential negative ACE
adjustment (that is, a negative amount
on line 4b multiplied by 75%) is allowed
as a negative ACE adjustment on
line 4e only if the corporation's total
increases in AMTI from prior year ACE
adjustments exceed its total reductions
in AMTI from prior year ACE
adjustments (line 4d). The purpose of
line 4d is to provide a “running balance”
of this limitation amount. As such, the
corporation must keep adequate
records (for example, a copy of Form
4626 completed at least through line 5)
from year to year (even in years in which
it does not owe any AMT).
Any potential negative ACE
adjustment that is not allowed as a
negative ACE adjustment in a tax year
because of the line 4d limitation cannot
be used to reduce a positive ACE
adjustment in any other tax year.
Combine lines 4d and 4e of the 2012
Form 4626 and enter the result on
line 4d of the 2013 form, but do not
enter less than zero.
Example. Corporation C, a
calendar-year corporation, was
incorporated January 1, 2009. Its ACE
and pre-adjustment AMTI for 2009
through 2013 were as follows.

Year

ACE
Line 4a

Preadjustment
AMTI
Line 3

2009
2010
2011
2012
2013

$700,000
 900,000
 400,000
 (100,000)
 250,000

$800,000
 600,000
 500,000
 300,000
 100,000

Corporation C subtracts its
pre-adjustment AMTI from its ACE in
each of the years and then multiplies the
result by 75% to get the following
potential ACE adjustments for 2009
through 2013.

Year

ACE minus
pre-adjustm
ent
AMTI
Line 4b

Potential
ACE
adjustment
Line 4c

2009
2010
2011
2012
2013

$(100,000)
 300,000
 (100,000)
 (400,000)
150,000

$ (75,000)
225,000
 (75,000)
 (300,000)
112,500

Under these facts, Corporation C has
the following increases or reductions in
AMTI for 2009 through 2013.

Year

Increase or (reduction)
in AMTI from ACE
adjustment
Line 4e

2009
2010
2011
2012
2013

$0
225,000
 (75,000)
(150,000)
112,500

In 2009, Corporation C was not
allowed to reduce its AMTI by any part
of the potential negative ACE
adjustment because it had no increases
in AMTI from prior year ACE
adjustments.
In 2010, Corporation C had to
increase its AMTI by the full amount of
its potential ACE adjustment. It was not
allowed to use any part of its 2009
unallowed potential negative ACE
adjustment of $75,000 to reduce its
2010 positive ACE adjustment of
$225,000.
In 2011, Corporation C was allowed
to reduce its AMTI by the full amount of
its potential negative ACE adjustment
because that amount is less than its
line 4d limit of $225,000.
In 2012, Corporation C was allowed
to reduce its AMTI by only $150,000. Its
potential negative ACE adjustment of
$300,000 was limited to its 2010
increase in AMTI of $225,000 minus its
2011 reduction in AMTI of $75,000.

In 2013, Corporation C must increase
its AMTI by the full amount of its
potential ACE adjustment. It cannot use
any part of its 2012 unallowed potential
negative ACE adjustment of $150,000
to reduce its 2013 positive ACE
adjustment of $112,500. Corporation C
would complete the relevant portion of
its 2013 Form 4626 as follows.
Line

Amount

4a
4b
4c
4d
4e

$250,000
 150,000
 112,500
 -0 112,500

Line 6. Alternative Tax Net
Operating Loss Deduction
(ATNOLD)

The ATNOLD is the sum of the
alternative tax net operating loss
(ATNOL) carrybacks and carryforwards
to the tax year, subject to the limitation
explained below. For a corporation that
held a residual interest in a real estate
mortgage investment conduit (REMIC),
figure the ATNOLD without regard to
any excess inclusion.
The ATNOL for a loss year is the
excess of the deductions allowed in
figuring AMTI (excluding the ATNOLD)
over the income included in AMTI. This
excess is figured 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).
In applying the rules relating to the
determination of the amount of
carrybacks and carryforwards, use the
modification to those rules described in
section 56(d)(1)(B)(ii).
The ATNOLD is generally limited to
90% of AMTI determined without regard
to the ATNOLD and any domestic
production activities deduction under
section 199. To figure AMTI without
regard to the ATNOLD, use a second
Form 4626 as a worksheet. Complete
the second Form 4626 through line 5,
but when figuring lines 2l and 2o, treat
line 6 as if it were zero. The amount
figured on line 5 of the second Form
4626 is the corporation's AMTI
determined without regard to the
ATNOLD. Add any domestic production
activities deduction to this tentative
total. The ATNOLD limitation is 90% of
this amount.
However, if an ATNOL carried back
or carried forward to the tax year is
attributable to qualified disaster losses
-7-

(as defined in section 172(j)), qualified
Gulf Opportunity Zone losses (as
defined in section 1400N(k)(2)),
qualified recovery assistance losses (as
defined in Pub. 4492-A, Information for
Taxpayers Affected by the May 4, 2007
Kansas Storms and Tornadoes),
qualified disaster recovery assistance
losses (as defined in Pub. 4492-B,
Information for Affected Taxpayers in
the Midwestern Disaster Area), or an
applicable 2008 or 2009 NOL for which
the corporation elected a 3, 4, or 5-year
carryback period (under section 172(b)
(1)(H)), the ATNOLD for the tax year is
limited to the sum of:
1. The smaller of:
a. The sum of the ATNOL
carrybacks and carryforwards to the tax
year attributable to net operating losses
other than qualified disaster losses,
qualified Gulf Opportunity Zone losses,
qualified recovery assistance losses,
qualified disaster recovery assistance
losses, and applicable 2008 and 2009
NOLs for which the corporation made
the election under section 172(b)(1)(H);
or
b. 90% of AMTI for the tax year
(figured without regard to the ATNOLD,
as discussed earlier, and the domestic
production activities deduction under
section 199) plus
2. The smaller of:
a. The sum of the ATNOL
carrybacks and carryforwards to the tax
year attributable to qualified disaster
losses, qualified Gulf Opportunity Zone
losses, qualified recovery assistance
losses, qualified disaster recovery
assistance losses, and applicable 2008
and 2009 NOLs for which the
corporation made the election under
section 172(b)(1)(H); or
b. 100% of AMTI for the tax year
(figured without regard to the ATNOLD,
as discussed earlier, and the domestic
production activities deduction under
section 199) reduced by the amount
determined under 1, above.
Enter on line 6 the smaller of the
ATNOLD or the ATNOLD limitation. The
ATNOL can be carried back or forward
using the rules outlined in section
172(b), generally, a two-year carryback
and a twenty-year carryforward. An
election under section 172(b)(3) to forgo
the carryback period for the regular tax
also applies for the AMT.
The ATNOL carried back or forward
may differ from the NOL (if any) that is
carried back or forward for the regular
tax. Keep adequate records for both the
AMT and the regular tax.

Line 7. Alternative
Minimum Taxable Income

For a corporation that held a residual
interest in a REMIC and is not a thrift
institution, line 7 may not be less than
the total of the amounts shown on
Schedule(s) Q (Form 1066), Quarterly
Notice to Residual Interest Holder of
REMIC Taxable Income or Net Loss
Allocation, line 2c, for the periods
included in the corporation's tax year. If
the total of the line 2c amounts is larger
than the amount the corporation would
otherwise enter on line 7, enter that total
and write “Sch. Q” on the dotted line
next to line 7.

Line 8. Exemption
Phase-Out Computation
If alternative minimum taxable
income entered on line 7 is
CAUTION
$310,000 or more, skip lines 8a
and 8b and enter - 0- on line 8c. You
cannot take an exemption.

!

Line 8a. If this Form 4626 is for a
member of a controlled group of
corporations, subtract $150,000 from
the combined AMTI of all members of
the controlled group. Divide the result
among the members of the group in the
same manner as the $40,000 tentative
exemption is divided among the
members. Enter this member's share on
line 8a. The tentative exemption must
be divided equally among the members,
unless all members consent to a
different allocation. See section 1561 for
details.
Line 8c. If this Form 4626 is for a
member of a controlled group of
corporations, reduce the member's
share of the $40,000 tentative
exemption by the amount entered on
line 8b.

Line 10

Multiply line 9 by 20% (.20) and enter
that amount on line 10.

Line 11. Alternative
Minimum Tax Foreign Tax
Credit (AMTFTC)

The AMTFTC is the foreign tax credit
refigured as follows.
1. Complete a separate AMT Form
1118, Foreign Tax
Credit—Corporations, for each separate
limitation category specified at the top of
Form 1118. Include as a separate
limitation category, dividends received
from a corporation that qualifies for the
American Samoa economic

development credit, if the
dividends-received deduction for those
dividends is disallowed under the ACE
rules.
In determining if any income is
“high-taxed” in applying the separate
limitation categories, use the AMT rate
(20%) instead of the regular tax rate.
2. For each separate AMT Form
1118, if the corporation previously made
or is making the simplified limitation
election (discussed below), skip
Schedule A and enter on Schedule B,
Part II, line 7, the same amount you
entered on that line for the regular tax.
Otherwise, complete Schedule A using
only income and deductions that are
allowed for the AMT and attributable to
sources outside the United States.
3. For each separate AMT Form
1118, complete Schedule B, Part II.
Enter any AMTFTC carryover on
Schedule B, Part II, line 5. Enter the
AMTI from Form 4626, line 7, on
Schedule B, Part II, line 8a. Enter the
amount from Form 4626, line 10, on
Schedule B, Part II, line 10. When
completing Schedule B, treat as a tax
paid to a foreign country 75% of any
withholding or income tax paid to
American Samoa on dividends received
from a corporation that qualified for the
American Samoa economic
development credit (if the
dividends-received deduction for those
dividends is disallowed under the ACE
rules).
4. For the AMT Form 1118,
complete Schedule B, Part III, Summary
of Separate Credits. The total foreign
tax credit is the amount on line 6.
5. Enter on Form 4626, line 11, the
smaller of:
The amount on Form 4626, line 10, or
The amount from the AMT Form
1118, Schedule B, Part III, line 6.
The corporation can use any
reasonable method, consistently
applied, to apportion the disallowed
amount among the separate limitation
categories (including the general
limitation income category). Any AMT
foreign tax credit for each separate
limitation category that the corporation
cannot claim (because of the limitation
fraction) is treated as a credit carryback
or carryforward for that limitation
category under section 904(c). Because
these amounts may differ from the
amounts that are carried back or
forward for the regular tax, keep
adequate records for both the AMT and
regular tax. When carried back or
forward, the credit is reported on
-8-

Schedule B, Part II, line 5, of the
carryover year's AMT Form 1118 for
that separate limitation category.

Simplified Limitation Election

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).

Line 13

Enter the corporation's regular tax
liability (as defined in section 26(b))
minus any foreign tax credit (for
example, Form 1120, Schedule J, line 2
minus any foreign tax credit entered on
Schedule J, line 5a), and minus any
applicable American Samoa economic
development credit from Form 5735
included on Schedule J, line 5b).

Do not include any:
Tax on accumulation distribution of
trusts from Form 4970,
Recapture of investment credit (under
section 49(b) or 50(a)) from Form 4255,
Recapture of low-income housing
credit (under section 42(j) or (k)) from
Form 8611, or
Recapture of any other credit.

Adjusted Current Earnings
(ACE) Worksheet
Instructions
Treatment of Certain
Ownership Changes

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).

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 2. ACE Depreciation
Adjustment

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 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(5) takes priority over
lines 2b(1), 2b(2), 2b(3), and
CAUTION
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(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

!

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 3. Inclusion in ACE of Items
Included in Earnings and Profits
(E&P)
In general, any income item that is not
taken into account (see below) in
determining the corporation's
pre-adjustment AMTI but that is taken
into account in determining its E&P must
be included in ACE. Any such income
item can be reduced by all items related
to that income item and that would be
deductible when figuring pre-adjustment
AMTI if the income items to which they
relate were included in the corporation's
pre-adjustment AMTI for the tax year.
Examples of these income items and
the adjustments that relate to them
include:
Interest income from tax-exempt
obligations excluded under section 103
minus any costs incurred in carrying
these tax-exempt obligations and
Proceeds of life insurance contracts
excluded under section 101 minus the
basis in the contract for purposes of
ACE.
-9-

An income item is considered taken
into account without regard to the timing
of its inclusion in a corporation's
pre-adjustment AMTI or its E&P. Only
income items that are permanently
excluded from pre-adjustment AMTI are
included in ACE. An income item will not
be considered taken into account
merely because the proceeds from that
item might eventually be reflected in the
pre-adjustment AMTI of another
taxpayer (for example, that of a
shareholder) on the liquidation or
disposal of a business.
Exceptions. Do not make an
adjustment for the following.
Any income from discharge of
indebtedness excluded from gross
income under section 108 (or the
corresponding provision of prior law).
Any extraterritorial income excluded
from gross income under repealed
section 114.
For an insurance company taxed
under section 831(b), any amount not
included in gross investment income (as
defined in section 834(b)).
Any special subsidy payment for
prescription drug plans excluded from
gross income under section 139A.
Any qualified shipping income
excluded under section 1357.
Tax-exempt interest on certain
housing bonds issued after July 30,
2008, excluded under section 57(a)(5)
(C)(iii).
Tax-exempt interest on certain
private activity bonds issued in 2009
and 2010. Special rules apply to
refunding bonds. See section 56(g)(4)
(B)(iv).
Line 3d. Include in ACE the income on
life insurance contracts (as determined
under section 7702(g)) for the tax year
minus the part of any premium
attributable to insurance coverage.
Line 3e. Do not include any adjustment
related to the E&P effects of any
charitable contribution.

Line 4. Disallowance of Items Not
Deductible From E&P
Generally, no deduction is allowed
when figuring ACE for items not taken
into account (see below) in figuring E&P
for the tax year. These amounts
increase ACE if they are deductible in
figuring pre-adjustment AMTI (that is,
they would be positive adjustments).
However, there are exceptions. Do
not add back:
Any deduction allowable under
section 243 or 245 for any dividend that

qualifies for a 100% dividends-received
deduction under section 243(a), 245(b),
or 245(c) and
Any dividend received from a
20%-owned corporation (see section
243(c)(2)), but only if the dividend is
from income of the paying corporation
that is subject to federal income tax.
Any allowable domestic production
activities deduction under section 199.

exceeds the AMT amount, enter the
result as a negative amount.

Special rules apply to:
Dividends from certain possession
corporations operating in American
Samoa.
Certain dividends received by certain
cooperatives.

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.

An item is considered taken into
account without regard to the timing of
its deductibility in figuring
pre-adjustment AMTI or E&P.
Therefore, only deduction items that are
permanently disallowed in figuring E&P
are disallowed in figuring ACE.
Items for which no adjustment is
necessary. Generally, no deduction is
allowed for an item in figuring ACE if the
item is not deductible in figuring
pre-adjustment AMTI (even if the item is
deductible in figuring E&P). The only
exceptions to this general rule are the
related reductions to an income item
described in the second sentence of the
instructions for line 3 above. Deductions
that are not allowed in figuring ACE
include:
Capital losses that exceed capital
gains;
Bribes, fines, and penalties
disallowed under section 162;
Charitable contributions that exceed
the limitations of section 170;
Meals and entertainment expenses
that exceed the limitations of section
274;
Federal taxes disallowed under
section 275; and
Golden parachute payments that
exceed the limitation of section 280G.
Line 4e. Do not include any adjustment
related to the E&P effects of any
charitable contribution.

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

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.

Do not make this adjustment
for expenditures for which the
CAUTION
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 LIFO inventory
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,

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enter the difference as a negative
amount.

Line 6. Disallowance of Loss on
Exchange of Debt Pools
When figuring ACE, a corporation may
not recognize any loss on the exchange
of any pool of debt obligations for any
other pool of debt obligations having
substantially the same effective interest
rates and maturities. Add back (that is,
enter as a positive adjustment) on line 6
any such loss to the extent recognized
for the regular tax.

Line 7. Acquisition Expenses of
Life Insurance Companies for
Qualified Foreign Contracts
For ACE, acquisition expenses of life
insurance companies for qualified
foreign contracts (as defined in section
807(e)(4) without regard to the
treatment of reinsurance contract rules
of section 848(e)(5) must be capitalized
and amortized by applying the treatment
generally required under generally
accepted accounting principles (and as
if this rule applied to such contracts for
all applicable tax years).
Subtract the ACE expense (if any)
from the regular tax expense and enter
the result on line 7. If the ACE expense
is more than the regular tax expense,
enter the result as a negative amount.

Line 8. Depletion
When figuring ACE, the allowance for
depletion for any property placed in
service in a tax year that began after
1989 generally must be determined
under the cost depletion method.
Subtract the ACE expense (if any)
from the AMT expense (used to figure
line 2l of Form 4626) and enter the
result on line 8 of the worksheet. If the
ACE expense is more than the AMT
amount, enter the result as a negative
amount.
Exception. Independent oil and gas
producers and royalty owners that
figured their regular tax depletion
deduction under section 613A(c) do not
have an adjustment for ACE purposes.

Line 9. Basis Adjustments in
Determining Gain or Loss From
Sale or Exchange of Pre-1994
Property
If, during the tax year, the corporation
disposed of property for which it is

making (or previously made) any of the
ACE adjustments, refigure the
property's adjusted basis for ACE. Then
refigure the property's gain or loss.
Enter the difference between the
AMT gain or loss (used to figure line 2e
of Form 4626) and the ACE gain or loss.
Enter the difference as a negative
amount if any of the following apply.
The ACE gain is less than the AMT
gain.
The ACE loss is more than the AMT
loss.
The corporation had an ACE loss and
an AMT gain.
Paperwork Reduction Act Notice.
We ask for the information on this form
to carry out the Internal Revenue laws of

the United States. You are required to
give us the information. We need it to
ensure that you are complying with
these laws and to allow us to figure and
collect the right amount of tax.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records
relating to a form or its instructions must
be retained as long as their contents
may become material in the
administration of any Internal Revenue
law. Generally, tax returns and return
information are confidential, as required
by section 6103.
The time needed to complete and file
this form will vary depending on

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individual circumstances. The estimated
average time is:
Recordkeeping . . . . . . 18 hr., 39 min.
Learning about the
law or the form . . . . . . 12 hr., 00 min.
Preparing and
sending the form to
the IRS . . . . . . . . . . . . 12 hr., 51 min.

If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form
simpler, we would be happy to hear
from you. See the instructions for the tax
return with which this form is filed.

Adjusted Current Earnings (ACE) Worksheet

Keep for Your Records

▶ See ACE Worksheet Instructions.
1
2

Pre-adjustment AMTI . Enter the amount from line 3 of Form 4626

......................................

1

ACE depreciation adjustment:
a AMT depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2a

b ACE depreciation:
(1)

Post-1993 property . . . . . . . . . . . . . . . . . . . . .

2b(1)

(2)

Post-1989, pre-1994 property . . . . . . . . . . . . . .

2b(2)

(3)

Pre-1990 MACRS property

2b(3)

(4)

Pre-1990 original ACRS property

...........

2b(4)

(5)

Property described in sections 168(f)(1) through
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2b(5)

(6)

Other property

2b(6)

(7)

Total ACE depreciation. Add lines 2b(1) through 2b(6)

...............

........................

.................

2b(7)

c ACE depreciation adjustment. Subtract line 2b(7) from line 2a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3

Inclusion in ACE of items included in earnings and profits (E&P):
a Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3a

b Death benefits from life insurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3b

c All other distributions from life insurance contracts (including surrenders)

..........

3c

................

3d

e Other items (see Regulations sections 1.56(g)-1(c)(6)(iii) through (ix) for a partial
list) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3e

d Inside buildup of undistributed income in life insurance contracts

f Total increase to ACE from inclusion in ACE of items included in E&P. Add lines 3a through 3e
4

3f

Disallowance of items not deductible from E&P:
a Certain dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4a

b Dividends paid on certain preferred stock of public utilities that are deductible under
section 247 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4b

c Dividends paid to an ESOP that are deductible under section 404(k)

4c

d Nonpatronage dividends that are paid and deductible under section 1382(c) . . . . . . . .

4d

e Other items (see Regulations sections 1.56(g)-1(d)(3)(i) and (ii) for a partial list) . . . . . .

4e

f Total increase to ACE because of disallowance of items not deductible from E&P. Add lines 4a through 4e . . . . . . . . . .
5

2c

4f

Other adjustments based on rules for figuring E&P:
a Intangible drilling costs

.............................................

5a

............................................

5b

c Organizational expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5c

d LIFO inventory adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5d

e Installment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5e

b Circulation expenditures

f Total other E&P adjustments. Combine lines 5a through 5e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5f

6

Disallowance of loss on exchange of debt pools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

7

Acquisition expenses of life insurance companies for qualified foreign contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

8

Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

9

Basis adjustments in determining gain or loss from sale or exchange of pre-1994 property

.....................

9

10

Adjusted current earnings. Combine lines 1, 2c, 3f, 4f, and 5f through 9. Enter the result here and on line 4a of
Form 4626 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

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