Instructions For Form 6251 - Alternative Minimum Tax - Individuals - 2006 Page 4
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regular tax basis of $10,000). For the
Section 1250 property placed in service
Qualified revitalization expenditures for
AMT, Ash has a long-term capital loss of
after 1998 that is not depreciated for the
a building for which you elected to claim
$40,000 (proceeds minus his AMT basis
regular tax using the straight line method;
the commercial revitalization deduction
of $100,000).
and
under section 1400I.
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Tangible property placed in service
A natural gas gathering line placed in
Ash has no other sales of stock or
after 1986 and before 1999. (If the
service after April 11, 2005.
other capital assets for 2006. Ash enters
transitional election was made under
a total negative adjustment of $118,000
How Is Depreciation Refigured for
section 203(a)(1)(B) of the Tax Reform
on line 16 of his 2006 Form 6251, figured
the AMT?
Act of 1986, this rule applies to property
as follows:
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placed in service after July 31, 1986.)
Property placed in service before 1999.
Ash figures a negative adjustment of
Refigure depreciation for the AMT using
$65,000 for the difference between the
What Depreciation Is Not Refigured
ADS, with the same convention used for
$65,000 of regular tax ordinary income
for the AMT?
the regular tax. See the following table for
and the $0 of AMT ordinary income for
Do not refigure depreciation for the AMT
the method and recovery period to use.
the first sale.
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for the following.
For the regular tax, Ash has $50,000
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Residential rental property placed in
Property Placed in Service Before 1999
capital gain net income reported on
service after 1998.
Schedule D for the second sale. For the
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IF the property is...
THEN use the...
Nonresidential real property with a
AMT, Ash has a $25,000 short-term
class life of 27.5 years or more placed in
section 1250 property straight line method
capital loss from the first sale, and a
service after 1998 that is depreciated for
over 40 years.
$40,000 long-term capital loss from the
the regular tax using the straight line
second sale, resulting in a net capital loss
tangible property
straight line method
method.
of $65,000 for the AMT. However, only
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(other than section
over the property’s
Other section 1250 property placed in
$3,000 of the $65,000 net capital loss is
1250 property)
AMT class life.
service after 1998 that is depreciated for
allowed for 2006 for the AMT. The
depreciated using
the regular tax using the straight line
difference between the regular tax
straight line method
method.
Schedule D gain of $50,000 and the
for the regular tax
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Property (other than section 1250
$3,000 loss allowed for the AMT results in
property) placed in service after 1998 that
any other tangible
150% declining
a $53,000 negative adjustment to include
is depreciated for the regular tax using
property
balance method,
on line 16.
switching to straight
the 150% declining balance method or
Ash has an AMT capital loss carryover
line method the first
the straight line method.
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from 2006 to 2007 of $62,000, of which
tax year it gives a
Property for which you elected to use
$22,000 is short-term and $40,000 is
larger deduction, over
the alternative depreciation system (ADS)
long-term. If he has no other Schedule D
the property’s AMT
of section 168(g) for the regular tax.
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transactions for 2007, his adjustment
class life.
Qualified property that is or was eligible
reported on line 16 of his 2007 Form 6251
for the special depreciation allowance
would be limited to ($3,000), the amount
under sections 168(k), 168(l) (in the case
Property placed in service after 1998.
of his capital loss limitation for 2007.
of qualified cellulosic biomass ethanol
Use the same convention and recovery
plant property), 1400L(b) (in the case of
period used for the regular tax. For
Line 17—Post-1986
qualified New York Liberty Zone
property other than section 1250 property,
Depreciation
property), or 1400N(d) (in the case of
use the 150% declining balance method,
This section describes when depreciation
qualified Gulf Opportunity Zone property)
switching to straight line the first tax year
must be refigured for the AMT and how to
if the depreciable basis of the property for
it gives a larger deduction. For section
figure the amount to enter on line 17.
the AMT is the same as for the regular
1250 property, use the straight line
tax. The special allowance is deductible
Do not use line 17 for depreciation
method.
for the AMT, and there also is no
related to the following.
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How Is the AMT Class Life
adjustment required for any depreciation
Employee business expenses claimed
Determined?
figured on the remaining basis of the
on line 20 of Schedule A (Form 1040) or
qualified property if the depreciable basis
line 9 of Schedule A (Form 1040NR).
The class life used for the AMT is not
of the property for the AMT is the same
Take this adjustment into account on line
necessarily the same as the recovery
as for the regular tax. Property for which
5.
period used for the regular tax. The class
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Passive activities. Take this adjustment
an election is in effect to not have the
lives for the AMT are listed in Rev. Proc.
special allowance apply is not qualified
into account on line 18.
87-56, 1987-2 C.B. 674, and in Pub. 946,
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property. See sections 168(k) for the
An activity for which you are not at risk
How To Depreciate Property. Use 12
definition of qualified property, 168(l) for
or income or loss from a partnership or an
years for any tangible personal property
the definition of qualified cellulosic
S corporation if the basis limitations
not assigned a class life.
apply. Take this adjustment into account
biomass ethanol plant property,
See Pub. 946 for tables that may
1400L(b)(2) for the definition of qualified
on line 19.
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TIP
be used to figure AMT
New York Liberty Zone property, and
A tax shelter farm activity. Take this
depreciation. Rev. Proc. 89-15,
1400N(d)(2) for the definition of qualified
adjustment into account on line 26.
1989-1 C.B. 816, has special rules for
Gulf Opportunity Zone property.
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What Depreciation Must Be
short years and for property disposed of
Any part of the cost of any property for
Refigured for the AMT?
before the end of the recovery period.
which you made the election under
Generally, you must refigure depreciation
section 179 to treat the cost of the
How Is the Adjustment Figured?
for the AMT, including depreciation
property as a deductible expense. The
Subtract the AMT deduction for
allocable to inventory costs, for:
reduction to the depreciable basis of
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depreciation from the regular tax
Property placed in service after 1998
section 179 property by the amount of the
deduction and enter the result. If the AMT
that is depreciated for the regular tax
section 179 expense deduction is the
deduction is more than the regular tax
using the 200% declining balance method
same for the regular tax and the AMT.
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deduction, enter the difference as a
(generally 3-, 5-, 7-, and 10-year property
Motion picture films, videotapes, or
negative amount.
under the modified accelerated cost
sound recordings.
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recovery system (MACRS), except for
Property depreciated under the
In addition to the AMT adjustment to
qualified property eligible for the special
unit-of-production method or any other
your deduction for depreciation, you must
depreciation allowance (discussed later
method not expressed in a term of years.
also adjust the amount of depreciation
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on this page));
Qualified Indian reservation property.
that was capitalized, if any, to account for
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