Federal Adjusted Current Earnings (ACE) depreciation is computed from entries made on this worksheet. The Force Calculation option is also available for current ACE depreciation computations for assets placed in service prior to January 1, 1994 only. The ACE depreciation will equal the AMT depreciation for all assets placed in service after December 31, 1993. The Adjusted Current Earnings (ACE) depreciation adjustment is computed as the difference between the Alternative Minimum Tax and ACE depreciation. The adjustment carries to the Form 4626 ACE worksheet or to the Schedule K "Other Adjustments and Tax Preference Items" line.
There are four computations made for ACE depreciation, depending on when the asset is placed in service and the beginning date of the corporation's tax year. The AMT/ACE report shows the computations on an asset-by-asset basis.
ACE Computations Performed
1. MACRS assets placed in service after December 31, 1993. These assets will calculate an ACE depreciation equal to the AMT depreciation.
2. MACRS assets placed in service after the beginning of the corporation's 1990 tax year. This computation uses the straight line method. The "Cost/Other Basis" of the asset less any prior or current Section 179 expense is divided by the "AMT/ACE Life" entered . An entry in "ACE Basis (if different)" overrides any entry in the "Cost/Other Basis." If no entry is made in the "AMT/ACE Life" field, the MACRS ADS life defaults apply. The same convention (half year, mid-quarter, or mid-month) used for regular depreciation applies to ACE depreciation.
3. MACRS assets placed in service before the beginning of the 1990 tax year. This computation uses the straight line method. The life of the asset is the remaining ADS life at the beginning of the 1990 tax year. The remaining ADS life is computed based on the "AMT/ACE Life" entered or the assumed MACRS ADS life default.
ACE basis is the AMT adjusted basis at the end of the 1989 tax year. Any prior year Section 179 expense is subtracted from the basis entered in the "ACE Basis (if different)" field. If no entry is made for "ACE Basis (if different)," the computation uses the entry in the "Cost/Other Basis" field. A diagnostic message is issued when this default amount is used. The same MACRS conventions apply.
4. ACRS assets placed in service before the beginning of the 1990 tax year. This computation uses the straight line method. The life of the asset is the remaining ADS life at the beginning of the 1990 tax year. The remaining ADS life is computed using the "AMT/ACE Life" field or the ACRS ADS life default.
ACE basis is the regular adjusted basis at the beginning of the 1990 tax year. Any prior Section 179 expense or ITC basis adjustment is subtracted from the basis. If no entry is made for "ACE Basis (if different)," the computation uses the entry in the "Cost/Other Basis" field. A diagnostic message is issued when this default basis is used.