AMT Depreication

[PatrickSanford]

From what I can tell, ProConnect is not doing a good job calculating AMT depreciation.

For AMT, you have to use ADS. If the life is 10 years or less, you can use 150% declining balance.

But I just had a furniture and fixture that I elected to depreciate under ADS SL 10-years for regular tax. AMT depreciation schedules. Here's my input below:

As you can see, the input for the method is 7-year SL, but with a life of 10 years. (The election for ADS is on the elections screen). AMT ignored the life completely and but did pick up the SL. So, it depreciated this asset for 7 years, SL.

If I remove the 10 year class life, and use the 7-year 200% Double Declining Balance, for AMT, the AMT depreciation schedule USES 7-YEAR 200% DOUBLE DECLINING BALANCE!!! It's wrong! It's not allowed!

I mean, there isn't a way to easily switch from GDS to ADS, or from 200% declining balance to 150% declining balance, at least not from the depreciation input screens. There's a whole lot of, "you better know what you are doing, cause the software only helps you if you do know what you are doing."

[TaxGuyBill]

Unless you elected OUT of Bonus depreciation, I think it is doing it correctly.  The 6251 Instructions say:

"Don’t refigure depreciation for the AMT for the following ... Qualified property that is or was eligible for a special depreciation allowance if the depreciable basis of the property is the same for the AMT and the regular tax."

As a side note, even if the above didn't apply, the Recovery Period would still be the same (assuming it was not Section 1250 property and placed in service after 1998; but 150% DB would still apply).

[PatrickSanford]

Sorry TaxGuyBill, I should have put that in my original post. This is if you are electing out of bonus depreciation.

And, you are right, the 150% would apply. But if you elect out of bonus in the software, and put a 5-year or 7-year property at 200% regular tax, the software just copies what is in federal for AMT. That's not right. A 7-year 200% GDS property should be a 10-year 150% for office furniture, fixtures, and equipment. ProConnect is not getting this right.

[TaxGuyBill]

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@PatrickSanford wrote:

A 7-year 200% GDS property should be a 10-year

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No, it is still 7 year.  See the Instructions for 6251.

As for the 150% for AMT, are you SURE you elected out of Bonus?  Your screenshots don't seem to indicate that you did that.

[PatrickSanford]

Here's some screenshot of the 2021 return for the same client:

The election was made. Assets were put input.

But yes. I'm sure the election was made. It's still shouldn't have 200% double declining balance method on AMT.

What I found in the instructions for the Form 6251 was this, which does seem to indicate that ADS lives aren't used for AMT anymore:

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Property placed in service after 1998. Use the same convention and recovery period used for the regular tax. For property other than section 1250 property, use the 150% declining balance method, switching to straight line the first tax year it gives a larger deduction. For section 1250 property, use the straight line method.

How Is the AMT Class Life Determined?
The class life used for the AMT isn’t necessarily the same as the recovery period used for the regular tax. The class lives for the AMT are listed in Rev. Proc. 87-56, 1987-2 C.B. 674, and in
Pub. 946, How To Depreciate Property. Use 12 years for any tangible personal property not assigned a class life.

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[TaxGuyBill · Accepted solution]

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@TaxGuyBill wrote:

"Don’t refigure depreciation for the AMT for the following ... Qualified property that is or was eligible for a special depreciation allowance if the depreciable basis of the property is the same for the AMT and the regular tax."

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Okay, looking at the Instructions again, it says to not re-figure for AMT if it is "eligible" for the SDA.

For the most part, AMT depreciation no longer exists for most personal property.

[PatrickSanford]

Okay. TaxGuyBill.

I found this language in the same paragraph in the instructions you quoted:

If you elected not to have any special depreciation allowance apply, the property may be subject to an AMT adjustment for depreciation if it was placed in service before 2016. It isn’t subject to an AMT adjustment for depreciation if it was placed in service after 2015.

So... I apologize. I appear to have been ignorant on the current AMT rules. Thanks for being patient with me and showing me what and where the rules were.

[TaxGuyBill]

No problem!  It is easy to forget things.  I so rarely need to deal with AMT, I need to look things up every time.