Do AMT Items "Post-1986 Depreciation Adjustment" impact shareholder's basis?

[MarinaEA]

The S Corp shareholder's K-1 line 15 "Alternative minimum tax items" code A "Post 1986 depreciation adjustment" has a number. Could anyone explain what that is, and does it impact shareholder's basis?

I want to say no, it does not, but I am questioning myself.

Thank you!

[sjrcpa]

It impacts their AMT basis.

It is the difference between depreciation computed for regular tax and for AMT.

[MarinaEA]

Thank you, so do I need to consider this ( deduct or add) when calculating shareholders stock or debt basis? Seems not? For example, sec 179 would reduce shareholders stock basis. Not quite sure how ATM basis would impact their stock or debt basis or it would not? 

[sjrcpa]

There are 2 basis computations. One for Regular Tax and one for Alternative Minimum Tax (AMT).

This item impacts the AMT stock basis only.

[MarinaEA]

Ok, so when we calculate shareholder's basis, we calculate stock and debt basis and the form 7203 that we are required to file with 1040 only has stock and debt basis limitation computations. I have never computed the ATM basis, and I am reviewing prior year returns by another CPA and ATM  "1986 Post depreciation adjustment" amount does not reflect anywhere in the stock or debt basis computation. So what is the purpose of the ATM stock basis computation, and when or why would this be needed? 

I want to make sure that I am not missing anything in calculating stock and debt basis for the purpose of how much of the loss is allowed by the shareholder or if the distribution is in excess of stock basis, if ATM items impact this. So this has no impact on this since it has no impact on the stock and debt basis. Correct? Am I overthinking? 🙂

[sjrcpa]

Since the AMT basis and Regular Tax basis can be different, allowable losses due to stock basis limitations can be different. Likewise distributions in excess of basis could be different. Finally, upon a sale of the stock, the gain or loss could be different.

[MarinaEA]

Can you please explain this based on this example where would AMT have any impact on the stock basis in this stock basis calculation. The form 7203 that we are required to submit with 1040 does not have a line to reflect AMT in the shareholder stock basis computation, so I am not understanding the impact of this.

From K-1 (using simple numbers):

Income - 100

Distribution - 200

AMT Post 1986 Depreciation Adjustment- 200

To calculate ending stock basis, we take beginning basis, add income and deduct distributions. The distribution in excess of basis is a gain. So let's use 0 as beginning basis, add 100, deduct 200. Ending basis is zero and 100 is reported as a gain on the return (distribution is in excess of basis). Where and how AMT of 200 is used in this calculation and would impact how much of a gain we need to report?

A different example with a loss.

From K-1:

Business Loss -100

AMT Post 1986 Depreciation Adjustment- 200

Let's say, the beginning stock basis is 50. So we can only take a loss of 50 on 1040 due to stock basis limitation. So we take 50 as a loss on 1040. Where and how AMT of 200 is used in this calculation or would impact the allowable loss of 50?

Thank you