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Corporation Formation
(R4 M1) (Corporation:
Limited liability
Entity…
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Corporate AMT
(R4 M5)
Corporate Alternative Minimum Tax:
- Corporations are subject to a minimum tax (AMT) of 20% on alternative minimum taxable income (AMTI)
- Exemption: smaller C corporations are exempt from AMT: gross receipts from the previous 3 years <=$7.5m (5m for first three years of C corp)
AMT Calculation:Regular Taxable Income+/- Adjustments:
Adjustments for gain/ loss
Long-term contracts
Installment sales (dealers)
Excess depreciation+ Preferences:
Percentage depletion
Private activity
Pre-1987 ACRS excess depreciation= Unadjusted alternative minimum taxable incomeAdjust current earnings (ACE): 75%
Municipal interest income
Organizational expense amortization
Life insurance proceeds on key employees
Difference between AMT and ACE depreciation
Dividends-received deduction (under 20% ownership)**(AMT NOL deduction)
= Alternative minimum taxable income (AMTI)(AMT exemption)
= Alternative minimum tax base*20%
= Gross alternative minimum tax(AMT foreign tax credit)
= Tenative minimum tax(Regular tax laibility)
= Alternative Minimum Tax
- Alternative Tax Net Operating Loss Deduction: limited to 90% of AMTI
Exemption amount = 40,000 less 25% of AMTI in excess of 150,000
- Tax rate: 20% flat rate
- The alternative minimum tax foreign tax credit (AMTFTC) is the only credit allowed against tentative minimum tax
- The unused MTC can CFFOREVER
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