[jdiiorio]

Hi All. Anyone out there understand the AMT pretty well? I understand the purpose, the exemption etc. But I am confused on how to figure out what is added back and what is subtracted. I am using becker so here is how I’m looking at it

Regular Taxable Income

+/- Adjustments

Long-term Contracts (refers to POC vs. Completed Contract – AMT allows only POC? how do I know when to +/- the diff)

Installment sales (again I understand full accrual vs. regular installment sales but when do I +/- the difference?

Excess Depreciation (AMT does not use 200% accelerated? so add back the excess? or subtract?)

+ Preferences

Percentage of depletion, private activity bonds pre-1987 ACRs depreciation = not sure what it means to have a preference. What exactly am I adding back for these items?

+/- ACE (Accumulated Current Earnings)

Municipal Bond interest (add back since this is not allowed in AMT?)

Increase life insurance cash surrender value (I don’t understand this, what am I adding back or subtracting?)

Non SL depreciation after 1989 vs. ADS (again don’t get this point)

Dividends Received Deduction (is this allowed or not what do I add back or subtract?)

Sorry this is long I’ve been reading online about AMT for hours and somehow I’m still confused =(

ILLINOIS CANDIDATE
FAR - Passed
BEC - Passed
AUD - Passed

[lovexly]

Regular Taxable Income

+/- Adjustments

Long-term Contracts (refers to POC vs. Completed Contract – AMT allows only POC? how do I know when to +/- the diff)

AMT doesn't allow the Completed Contract method because u r essentially DEFERRING income recognition. soo ADD! (this is more into FAR, but basically if u completed 20% of the job, u will recognize 20% of the income under POC, but under CC, u will recognize 0)

Installment sales (again I understand full accrual vs. regular installment sales but when do I +/- the difference?

add back. They don't let u defer income recognize. recognize the entire sale immediately.

Excess Depreciation (AMT does not use 200% accelerated? so add back the excess? or subtract?)

Excess Depreciation have to be added back

Think, when u r computing depreciation under MACRS for personal property, usually it's going to be 200% DDB. For AMT, they only allow 150%, so you have to ADD back to Taxale Income.

e.g. under 200%, your depreciation expense = $200

under 150%, it would have been $150.

Since Depreciation Expense of $200 was sutracted to get Taxable Income, you have to add back $50 (the difference) so total depreciation expense is based on 150%.

+ Preferences

Percentage of depletion, private activity bonds pre-1987 ACRs depreciation = not sure what it means to have a preference. What exactly am I adding back for these items?

Private Activity bonds interest is usually tax-exempt so you are adding back the interest that weren't included in 1120. I think there's an exception for PAB that were ISSUED in 2009 and 2010 OR 2008 and 2009 that are not considered preference items. Double-check on that.

Pre-1987 depreciation was excessive.

U r just adding back.

+/- ACE (Accumulated Current Earnings)

Municipal Bond interest (add back since this is not allowed in AMT?) — YUP, not exempt for AMT purposes

Increase life insurance cash surrender value (I don't understand this, what am I adding back or subtracting?)

Non SL depreciation after 1989 vs. ADS (again don't get this point)

Dividends Received Deduction (is this allowed or not what do I add back or subtract?)

If u get dividends from a corp that u have less than 20% ownership, u were given a 70% DRDeduction. Well, for AMT purposes, ADD that deduction back in so essentially, 100% of your dividends received will be recognized. **This does not apply to 80% or 100% DRD

Basically, to simplify, most deductions you took on your original 1120 will be added back.

FAR - 83 - 05/23/2011
BEC - 85 - 07/02/2011
AUD - 79 - 08/13/2011
REG - scheduled Oct 10

[jdiiorio]

Thanks sooo much! This really helps!!

ILLINOIS CANDIDATE
FAR - Passed
BEC - Passed
AUD - Passed

[yankeeaccountant]

Great thread…every bit helps with REG!

[Author]

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