TEB - Computation of Alternative Minimum Tax Adjustment

For closing agreements providing that interest on bonds will not be treated as an item of tax preference for the alternative minimum tax, the closing agreement amount is an estimate of the federal income tax liability that all bondholders referenced in the closing agreement period would have been or would be required to pay if the items in question were treated as subject to the alternative minimum tax.

Compute the alternative minimum tax adjustment as follows:

Step 1. Determine the principal amount of bonds that will be outstanding on January 1 of each calendar year for that period that begins with the calendar year in which the compliance failure occurred and ends with the first calendar year in which the nonqualified bonds will no longer be outstanding.

Step 2. Multiply the amount determined in Step 1 for each calendar year by 0.0014.

Step 3. Compute the present value of each amount determined in Step 2 for each calendar year in accordance with IRM 4.70.14.2.1.5.9.15, TEB – Computing Value as of the Closing Agreement Execution Date, by assuming it is paid on April 15 in the following calendar year.

Step 4. Add the present value amounts determined in Step 3 for all calendar years. This amount is the alternative minimum tax adjustment.