Durell owns a construction company that builds residential housing. The company is eligible to use the completed contract method for regular income tax purposes. What can Durell do to minimize his AMT?
The use of the completed contract method for regular income tax purposes by Durell will result in the excess of the income calculated under the percentage of completion method over that reported under the completed contract method being treated as a positive adjustment for AMT purposes. Likewise, if for a particular tax year, the income calculated under the percentage of completion method is less than that under the completed contract method, this difference is a negative adjustment for AMT purposes. Durell can eliminate this AMT positive or negative adjustment by using the percentage of completion method for regular income tax purposes. Then, the same method of accounting will be used for both regular income tax purposes and AMT purposes.
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