In calculating alternative minimum taxable income (AMTI), in addition to adding back or subtracting AMT adjustment items (Code Sec. 56), under Code Sec. 57, taxpayers must add back certain AMT preference items. The AMT preference items are:
Preference items, unlike adjustment items (discussed on the AMT Adjustments page), are always add backs in calculating AMTI. The items are added back to income on page 1 of Form 6251. Many, if not most, individual taxpayers will only have AMT preference items that are passed through to them from partnerships, LLCs, or S Corporations on a Schedule K-
NOTE: All line references to Form 6251 below are to the 2017 Form 6251.
If a taxpayer’s Code Sec. 611 deduction for depletion for a year is greater than the adjusted basis at the end of the year of the property being depleted, the difference is added back as a preference on Form 6251, line 9. This rule does not apply to depletion claimed by oil and gas independent producers and royalty owners under Code Sec. 613A(c).
Excess Intangible Drilling Costs
The amount (if any) by which the amount of the excess intangible drilling costs arising in the taxable year is greater than 65 percent of a taxpayer’s net income from oil, gas, and geothermal properties for the taxable year is a preference item included on Form 6251, line 26.
Interest on Specified Private Activity Bonds
Interest on specified private activity bonds, which is excluded from income for regular tax is added back as a preference item on Form 6251, line 12. The amount added back is reduced by any deduction attributable to the bonds which would have been allowable if the interest were includible in gross income for regular tax.
Accelerated Depreciation or Amortization on Property Placed in Service before January 1, 1987
The amount of accelerated depreciation or amortization on property placed in service before January 1, 1987 in excess of the amount that would be allowed if straight line depreciation was used is added back as a preference on Form 6251, line 27 (Other Adjustments). This adjustment generally only applies to property that was placed in service after January 1, 2007 but is being depreciated under the pre-
Exclusion of Gain on Sale of Qualified Small Business Stock
For regular tax purposes, taxpayers under certain circumstances can exclude some or all of the gain on the sale of qualified small business stock (QSBS) from taxable income (Code Sec. 1202). For AMT, 7% of the gain on QSBS that is excluded under Code Sec. 1202 is added back as a preference item on Form 6251, line 13.
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