Annualizing AMT in the first short year.

• Author: Marchbein, Joe B.
• Position: Alternative minimum tax - Brief Article

If a corporation is in existence during only part of its first tax year, the taxable income reported on the return does not have to be annualized for regular income tax purposes. The annualization requirement for regular tax purposes applies only when a change of accounting period creates a short tax year.

However, even if a tax return covers a short period only for the initial year, the taxpayer must computer its alternative minimum tax (AMT) by annualizing its short period AMT income (Sec. 443(d)). This calculation is made by dividing the short period AMT income by the number of months in the period and then multiplying the resulting figure by 12 to determine the annualized AMT income. A tentative minimum tax (TMT) is then computed based on the annualized amount. The annualized TMT is divided by 12 and the resulting quotient is multiplied by the number of months in the short period. The regular tax for the short period is subtracted...