[Evwy_Mom]

Eastern Corp., a calendar year corporation, was formed January 3, 20X9, and on that date placed five-year property in service. The property was depreciated under the general MACRS system. Eastern did not elect to use the straight-line method. The following information pertains to Eastern:

Eastern’s 20X9 taxable income $300,000

Adjustment for the accelerated

depreciation taken on 20X9

five-year property $1,000

20X9 tax-exempt interest from

specified private activity bonds

issued after August 7, 20X1 $5,000

What was Eastern’s 20X9 alternative minimum taxable income before the adjusted current earnings (ACE) adjustment?

The answer given is $306,000.

Where I’m confused is that the question asks for PRE-ACE AMTI. I understand that private activity bond interest is added back as a preference item (so that’s pre-ACE) but the depreciation is getting me because depreciation is an adjustment item under adjustments, preferences, and ACE.

From looking at the answer to this question, I assume that this would “Excess Depreciation – Post 1986” under the umbrella of the “Adjustments” mnemonic “L.I.E.”

But how do you know? I’m confused as to how you know how to classify the depreciation adjustment. It’s also “non-straight line” isn’t it?

AUD = 85
FAR = 79
BEC = 79
REG = 65, 72, 75!

I AM DONE!!

[leglock]

There r two separate depreciation calcs that can affect amt. one is book vs tax deprec which is used to calculate unadjusted amti. This is lie u referenced. The second is the depreciation calculation that factors in when calculating the ace adjustment. It is ace deprec vs tax deprec. Generally the problem will tell u that ace deprec was x. That will clue u in that it meeds to b used for the ace adjustment calculation

In this problem, they wanted unadjusted amti so u only have to adjust based on book vs tax deprec

[Evwy_Mom]

I feel like we spend so much time trying to figure out what they REALLY want – it just seems ridiculous that we should have to spend time wondering what they are asking, rather than being tested on things that matter, like how to DO the calculations.

Thanks, I'll have to spend some time going over this tonight.

AUD = 85
FAR = 79
BEC = 79
REG = 65, 72, 75!

I AM DONE!!

[Evwy_Mom]

Also, is that the only clue we'll have that they want one vs. the other?

Is there any hard and fast rule that X,Y,Z depreciation is always before adjusted AMTI and A,B,C depreciation is always an ACE adjustment?

AUD = 85
FAR = 79
BEC = 79
REG = 65, 72, 75!

I AM DONE!!

[Evwy_Mom]

https://www.bus.ucf.edu/faculty/ckelliher/file.axd?file=2011%2F1%2Fsummary_tax_depreciation_rules.pdf

AUD = 85
FAR = 79
BEC = 79
REG = 65, 72, 75!

I AM DONE!!

[Evwy_Mom]

^Link I thought may be helpful to others.

AUD = 85
FAR = 79
BEC = 79
REG = 65, 72, 75!

I AM DONE!!

[Author]

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