this may be a dumb question but we need to add these both back. in layman terms can someone explain why we're adding back the depreciation?. general depreciation amount is less than the accelerated so surely we'd have a larger depreciation deduction under accelerated depreciation and therefore be deducting the $1k? or are these words just to confuse us as normally you'd do MACRS 200 and for AMT MACRS 150 (so add back)…..
Eastern Corp., a calendar-year corporation, was formed January 3, Year 5, and on that date placed 5-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 Year 5 taxable income $300,000
Adjustment for the accelerated
depreciation taken on Year 5
5-year property 1,000
Year 5 tax-exempt interest from
specified private activity bonds
issued after August 7, 1986 5,000
What was Eastern's Year 5 alternative minimum taxable income before the adjusted current earnings (ACE) adjustment?
300,000+1,000+5,000 = 306,000
.