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How do I calculate Passive Activities (difference between AMT

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and regular tax income or...
How do I calculate Passive Activities (difference between AMT and regular tax income or loss)?
Submitted: 7 years ago.Category: Tax
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Answered in 5 minutes by:
10/6/2010
Tax Professional: Brenda Guy, Certified Public Accountant (CPA) replied 7 years ago
Brenda Guy
Brenda Guy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 151
Experience: 20 years of working with income and estate tax issues for families and businesses.
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Brenda Guy :

You add or subtract the amt adjustments for each passive activity to the regular passive loss.

Customer :

I show a positive number for passive activities. What is the specific formula (form / lines to add together)?

Brenda Guy :

It will probably be most positive for amt. If the activity is residential rental then there will be a depreciation add back since the depreciable life for AMT is 40 instead of 27.5. If the activities are flow through from S corps or partnership the amt adjustment will be on the form K-1

Customer :

Does it make a difference if I was active or passive in the business?

Brenda Guy :

if you were active in the business then you don't have a passive activity

Brenda Guy :

Is this an s corp or partnership?

Customer :

On the K-1 Line 15A and B, I was allocated AMT items. It is an S-corp.

Brenda Guy :

So the amt items get reporte on your 6251. If you are active in the s corp it is not passive and you do not need to calculate passive activities.

Customer :

Correct. On the 1040 Schedule E, it came through as Passive Income. I spent over 100 hrs on the business and over 500 hrs total, so it should have been active. What is the best way to handle this?

Brenda Guy :

It should be on sch E. If it is positive it is probably fine. Sch E shows flow throughs both passive and active. Do you have any activities that are really passive?

Brenda Guy :

As long as it is not being reported on form 8582 you are fine.

Customer :

Yes. It showed a gain also. If it is positive, does it make a difference whether it is active or passive? It did not show on 8582.

Brenda Guy :

If it is positive it does not matter whether it is active or passive. If you are using software there should be a box to check where you input the K-1 to tell it active partipation.

Customer :

I think my accountant checked passive, when it was really active. Does this make a difference for AMT?

Brenda Guy :

no

Customer :

Not much that can be done then on the revised 6251 with the loss carried back, as far as passive activities go. Is this correct?

Brenda Guy :

correct. amt can really burn you on a carryback

Customer :

I am realizing that. Is there any credit that can be carried forward given the increased AMT?

Brenda Guy :

yes, if amt applies in a carryback year there is potentially an amt credit available for the next year. This credit is only available if the amt tax is caused by business amt adjustments as opposed to personal amtadjustments

Customer :

The loss results from a business loss. There were "passive activities" from the business. Do these help?

Brenda Guy :

It is hard to determine. The carryback calculation is pretty complex. The amt issue on a carryback generally has nothing to do with passive activities. And when passive activities result in income they really are a nonissue

Customer :

OK. Thanks again for your help...

Brenda Guy :

you are welcome.

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