Other Corporate Tax Levies
Unless otherwise stated, all answers assume the corporation does not qualify for the AMT’s small
Congress enacted the corporate AMT to ensure that every corporation with substantial
economic income pays a minimum amount of tax despite the use of exclusions, deductions, and
Tax preference items
are a series of items specified in Sec. 57(a) that are added to
corporate taxable income along with adjustments to compute AMTI (see Table C:5-1).
are increases or decreases to corporate taxable income (generally
reflecting the recomputation of income, gain, loss, or deduction items) made to compute AMTI (see
Alternative minimum taxable income (AMTI)
is the corporation's taxable income
increased by tax preference items, increased or decreased by adjustments (income, gain, loss, and
deduction adjustments that must be recomputed under the AMT) and reduced by the alternative tax
NOL deduction (See Table C:5-1).
Statutory exemption amount
is $40,000 and is reduced by 25% of the amount by
which AMTI exceeds $150,000.
The corporate exemption is completely phased-out when AMTI
In addition, the statutory AMT exemption must be allocated among the
members of a controlled group.
Tentative minimum tax (TMT)
is calculated by (1) multiplying 20% times the
corporation's AMTI, net of the statutory exemption amount remaining after the phase-out, and (2)
subtracting the allowable AMT foreign tax credit (AMT FTC).
Minimum tax credit
equals the amount of alternative minimum tax paid.
corporation can use this credit only on a prospective basis to the extent that its regular tax in later
years exceeds its tentative minimum tax.
pp. C:5-4 through C:5-7, C:5-9, and C:5-14.
Small C corporations are exempt from the AMT for tax years beginning after
December 31, 1997.
A C corporation created after 1997 is generally exempt from the corporate
AMT for its initial tax year regardless of its gross receipts for the tax year.
A special aggregation
rule applies if the operating results of a C corporation are aggregated with those of one or more
corporations under Sec. 448(c)(2) or is a successor to another corporation under Sec. 448(c)(3).
qualify for the second tax year, gross receipts for the first tax year must not exceed $5 million.
qualify for the third tax year, the corporation’s average gross receipts for the first two tax years
must not exceed $7.5 million.
To qualify for the fourth tax year, the corporation’s average gross
receipts for the first three tax years must not exceed $7.5 million.
This three-year look-back rule is
used for succeeding tax years.
Special transitional rules applied to corporations formed after
December 31, 1993 and before January 1, 1998.
The transitional rules are discussed on page C:5-2
of the textbook.