In the current year, FurnitureKing Corporation recognized $32,000 of income from aninstallment sale it made in a previous tax year. If installment sales are the only difference between ACE and alternative minimum taxable income (before the ACE adjustment), what is the amount and nature of the ACE adjustment for the current tax year?

Question

Quizplus · Accepted Answer

Since FurnitureKing Corporation recognized $32,000 of income from an installment sale, this amount is included in the alternative minimum taxable income calculation. However, for ACE purposes, only the portion of the gain that was included in previous years' ACE adjustments is added back, which is $8,000 (assuming a 25% ACE adjustment rate). Therefore, the ACE adjustment is $24,000 favorable ($32,000 - $8,000 = $24,000).

In the Current Year, FurnitureKing Corporation Recognized $32,000 of Income