Theses, Dissertations, and Capstone Projects

Year of Award

1992

Degree

Master of Science in Taxation (MST)

College

College of Business & Professional Studies

Degree Program

Taxation

Department

Business Administration

Keywords

taxable income, adjustments, depreciation, deductable

Abstract

The presented thesis will explore the area of Adjusted Current Earnings (ACE), which is an integral component of the corporate alternative minimum tax system. With the replacement of the "book income adjustment" by the adjustment for ACE, for tax years beginning after December 31, 1989, many new complex rules have been added to the already demanding and complex alternative minimum tax system. Corporate tax practitioners had hoped that the rules for the ACE adjustment' to alternative minimum taxable income (AMTI) would be repealed or at least reduced in complexity. Although the ACE rules have gone through many revisions since they were devised, they remain extremely complex.

The requirements of the ACE rules are extremely far-reaching in their scope, and, difficult and expensive to implement. Many of the rules appear to be unfair and ambiguous in nature, especially the rules relating to adjustments for earnings and profits and the negative adjustment limitation. The ACE rules' also contain many specialized adjustments, notably a separate method for calculating depreciation, as well as adjustments for LIFO inventory reserves, intangible drilling costs, and ownership changes.

This thesis will lead the reader through the maze of ACE rules and attempt to simplify them with examples, exhibits, and a review of the important issues. An explanation of the ACE calculation, its abundance of varied adjustments, and tax planning measures to be considered, are all contained within this discussion. After reading this thesis, it is hoped that the reader will have become more accustomed with the "ins and outs" of the ACE computation, knowledgeable of the many adjustments and issues involved in the ACE computation, and aware of various tax planning strategies. It is the author's belief that the corporate tax practitioner must become very familiar with the ACE rules and issues, and, be prepared to focus on effective tax planning. Only with a thorough knowledge and understanding of the ACE rules, along with dedication to tax planning, can the practitioner hope to be successful in coping with ACE.

Document Type

Restricted Thesis

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