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subtracting available foreign tax credits. Sec. 55(b)(1)(A).
Once the tentative minimum tax is calculated, the third step
is to determine the adjusted regular tax6 for purposes of the
alternative minimum tax. The adjusted regular tax is a
taxpayer’s regular tax increased by any nonrefundable credits
taken, other than foreign tax credits or personal nonrefundable
credits. Sec. 55(c).
This adjusted regular tax is then compared to the tentative
minimum tax. If the tentative minimum tax is larger, any excess
over the adjusted regular tax is due as an additional tax for
that year. Sec. 55(a). If the tentative minimum tax is less, no
additional tax is owed but available business credits are limited
to the excess of the adjusted regular tax over the tentative
minimum tax,7 with the ability to carry any remaining credits
back one year and forward up to twenty years. Sec. 39.
To summarize,
! Start with a taxpayer’s regular income tax income;
! Adjust it by recalculating or eliminating certain
losses, exclusions, or deductions;
! Reduce it by an exemption amount;
6 We will refer to the “regular tax” defined in section
55(c) as “adjusted regular tax” to distinguish this term from the
“regular tax” defined in section 26(b).
7 See sec. 38(c)(1). The actual limitation calculation is
much more complex, but for our purposes, this simplified
explanation will do.
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Last modified: May 25, 2011