Alabama § 40-18-161 - Determination of Taxable Income.

§ 40-18-161. Determination of Taxable Income.

(a) The taxable income of an Alabama S corporation shall be determined in the same manner as in the case of an individual except that the items determined in subdivision (1), subsection (a) of Section 40-18-162 shall be separately stated, and the following deductions shall not be allowed:

(1) Personal exemptions otherwise allowed by Section 40-18-19.

(2) Charitable contributions otherwise allowed by Section 40-18-15, subdivision (a)(10).

(3) The net operating loss deduction otherwise allowed by Section 40-18-15, subdivision (a)(16).

(4) Medical expenses otherwise allowed by Section 40-18-15, subdivision (a)(13).

(5) Alimony otherwise allowed by Section 40-18-15, subdivision (a)(18).

(6) The deduction for certain expenses of producing income and determining taxes otherwise allowed by Section 40-18-15, subdivision (a)(14).

(7) Contributions to individual retirement accounts otherwise allowed by Section 40-18-15, subdivision (a)(11).

(8) Depletion on oil or gas wells otherwise allowed by Section 40-18-15, subdivision (a)(9).

(b) Amounts of income, loss, deduction, or credit for purposes of this article shall be determined under the allocation and apportionment rules of Chapter 27.

(c) Any election affecting the computation of items derived from an Alabama S corporation shall be made by the corporation.

(d)(1) If an Alabama S corporation was an Alabama C corporation for the last taxable year before the first taxable year during which it became an Alabama S corporation, and the corporation inventoried goods under the LIFO method for the last taxable year, the LIFO recapture amount shall be included in the gross income of the corporation for the last taxable year and appropriate adjustments to the basis of the inventory shall be made to take into account the amount included in gross income under this subdivision.

(2) Any increase in the tax imposed by this chapter by reason of this subsection shall be payable in four equal installments. The first installment shall be paid not later than the due date, (without extension), for filing the return for the last taxable year before the corporation became an Alabama S corporation and the three succeeding installments shall be paid not later than the due date, (without extension), for filing the returns for the succeeding three years. For purposes of computing interest on underpayments, the last three installments shall not be considered underpayments until after the payment dates specified in the previous sentence.

(3) For purposes of this subsection, the term “LIFO recapture amount” means the excess, (if any), of

a. the inventory amount of the inventory assets under the first-in, first-out method over

b. the inventory amount of such assets under the LIFO method. For purposes of the preceding sentence, inventory amounts shall be determined as of the close of the last taxable year before the corporation became an Alabama S corporation.

(4) For purposes of this subsection:

a. The term “LIFO method” means the method authorized by 26 U.S.C. § 472.

b. The term “inventory assets” means stock in trade of the corporation or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year.

c. The inventory amount of assets under the first-in, first-out method shall be determined - as follows:

1. By using the retail method of valuing inventories if the corporation uses that method in connection with the LIFO method, or

2. If subparagraph 1 does not apply, then by using cost or market, whichever is lower.