In general. In the case of any required installment, the amount of the adjusted seasonal installment is the excess (if any) of—

100 percent of the amount determined under paragraph (c) of this section; over

The aggregate amount of all prior required installments for the taxable year.

Limitation on application of section. This section applies only if the base period percentage (as defined in section 6655(e)(3)(D)(i) and paragraph (d)(1) of this section) for any six consecutive months of the taxable year equals or exceeds seventy percent.

Determination of amount. The amount determined under this paragraph (c) for any installment will be determined in the following manner—

Take the taxable income for all months during the taxable year preceding the filing month;

Divide such amount by the base period percentage for all months during the taxable year preceding the filing month;

Determine the tax on the amount determined under paragraph (c)(2) of this section; and

Multiply the tax computed under paragraph (c)(3) of this section by the base period percentage for the filing month and all months during the taxable year preceding the filing month.

Special rules—(1) Base period percentage. The base period percentage for any period of months is the average percent that the taxable income for the corresponding months in each of the three preceding taxable years bears to the taxable income for the three preceding taxable years. If there is no taxable income for the corresponding months, taxable income for this purpose is zero.

Filing month. The term filing month means the month in which the installment is required to be paid.

Application of the rules related to the annualized income installment method to the adjusted seasonal installment method. The rules governing the computation of taxable income (and resulting tax) for purposes of determining any required installment payment of estimated tax under the annualized income installment method under § 1.6655-2 apply to the computation of taxable income (and resulting tax) for purposes of determining any required installment payment of estimated tax under the adjusted seasonal installment method.

Alternative minimum tax. The amount determined under paragraph (c) of this section must properly take into account the amount of any alternative minimum tax under section 55 that would apply for the period of the computation. The amount of any alternative minimum tax that would apply is determined by applying to alternative minimum taxable income, tentative minimum tax, and alternative minimum tax, the rules described in paragraph (c) of this section for taxable income and tax.

Example. The provisions of this section may be illustrated by the following example:

X, a corporation that reports on a calendar year basis, expects to have an estimated tax liability of $1,200,000 for its taxable year ending December 31, 2009. On its 2008 tax return, X reports a tax liability of $652,800. X pays four installments of estimated tax, each in the amount of $250,000, $250,000, $250,000, and $450,000 on April 15, 2009, June 15, 2009, September 15, 2009, and December 15, 2009, respectively. X reports a tax liability of $1,152,600 on its return due March 15, 2010, with no credits against tax. Under the general provision of section 6655(b) and section 6655(d), there was an underpayment in the amount of $76,300 for the second installment through September 15, 2009, and $114,450 for the third installment through December 15, 2009, determined as follows:

Tax as defined in section 6655(g) = $1,152,600

100% of this paragraph (e), Example (i)(A) = $1,152,600

Amount of estimated tax required to be paid on or before the first installment (25% of $652,800) = $163,200

Deduction of amount timely paid on or before the first installment due date under the general rule of section 6655(b) = $250,000

Amount of overpaid estimated tax for the first installment date = $86,800

Amount of estimated tax required to be paid on or before the second installment (25% of $1,152,600 plus the recapture amount under section 6655(d)(2)(B) of $124,950 (25% of $1,152,600 less $163,200)) = $413,100

Deduction of amount paid on or before the due date of the second installment less amount applied towards the first installment under the general rule of section 6655(b) ($250,000 paid in each of the first and second installments less this paragraph (e), Example (i)(C)) = $336,800

Amount of underpayment for the second installment date = $76,300

Amount of estimated tax required to be paid on or before the third installment (25% of $1,152,600) = $288,150

Deduction of amount paid on or before the due date of the third installment less amount applied towards the first and second installments under the general rule of section 6655(b) ($250,000 paid in each of the first, second, and third installments less this paragraph (e), Example (i)(C) less this paragraph (e), Example (i)(F)) = $173,700

Amount of underpayment for the third installment date = $114,450

Amount of estimated tax required to be paid on or before the fourth installment (25% of $1,152,600) = $288,150

Deduction of amount paid on or before the due date of the fourth installment less amount applied towards the first, second, and third installments under the general rule of section 6655(b) ($250,000 paid in each of the first, second, and third installments plus $450,000 paid in the fourth installment less this paragraph (e), Example (i)(C) less this paragraph (e), Example (i)(F) less this paragraph (e), Example (i)(I)) = $335,550

Amount of overpaid estimated tax for the fourth installment date = $47,400

X wants to determine if it qualifies for the adjusted seasonal installment method. X determines that its monthly taxable income for the preceding three taxable years and for the current taxable year 2009 is as follows:

X must initially determine if its base period percentage for the same 6 consecutive months of the 3 preceding taxable years equals or exceeds 70 percent (see section 6655(e)(3) and paragraphs (b) and (c) of this section). By using its taxable income for the first 6 months of 2006, 2007, and 2008, X qualifies for the adjusted seasonal installment method because its base period percentage is 87.5 percent (which exceeds 70 percent) computed as follows:

Taxable income for first 6 months of 2006 = $420,000

Total taxable income for 2006 = $480,000

Divide this paragraph (e), Example (iii)(A) by this paragraph (e), Example (iii)(B) = .875

Taxable income for first 6 months of 2007 = $840,000

Total taxable income for 2007 = $960,000

Divide this paragraph (e), Example (iii)(D) by this paragraph (e), Example (iii)(E) = .875

Taxable income for first 6 months of 2008 = $1,680,000

Total taxable income for 2008 = $1,920,000

Divide this paragraph (e), Example (iii)(G) by this paragraph (e), Example (iii)(H) = .875

Add this paragraph (e), Example (iii)(C), (F), and (I) = $2.625

Divide this paragraph (e), Example (iii)(J) by 3 = .875

To determine the amount of the first installment under the rules of section 6655(e)(3) and paragraph (a) of this section, the following computation is necessary:

Taxable income for first 3 months of 2009 = $1,930,000

Taxable income for first 3 months of 2006 ($270,000) divided by total taxable income for 2006 ($480,000) = .5625

Taxable income for first 3 months of 2007 ($540,000) divided by total taxable income for 2007 ($960,000) = .5625

Taxable income for first 3 months of 2008 ($1,090,000) divided by total taxable income for 2008 ($1,920,000) = .5677

Add this paragraph (e), Example (iv)(B), (C), and (D) and divide by 3 = .5642

Divide this paragraph (e), Example (iv)(A) by this paragraph (e), Example (iv)(E) = $3,420,773

Determine the tax on this paragraph (e), Example (iv)(F) = $1,163,049

Taxable income for first 4 months of 2006 ($340,000) divided by total taxable income for 2006 ($480,000) = .7083

Taxable income for first 4 months of 2007 ($670,000) divided by total taxable income for 2007 ($960,000) = .6979

Taxable income for first 4 months of 2008 ($1,360,000) divided by total taxable income for 2008 (1,920,000) = .7083

Add this paragraph (e), Example (iv)(H), (I), and (J) and divide by 3 = .7048

Multiply this paragraph (e), Example (iv)(G) by this paragraph (e), Example (iv)(K) = $819,717

100% of this paragraph (e), Example (iv)(L) = $819,717

Amount of all prior required installments for 2009 = $0

Amount of adjusted seasonal installment for the first installment payment (this paragraph (e), Example (iv)(M) less this paragraph (e), Example (iv)(N)) = $819,717

To determine the amount of the second installment under the rules of section 6655(e)(3) and paragraph (a) of this section, the following computation is necessary:

Taxable income for first 5 months of 2009 = $2,950,000

Taxable income for first 5 months of 2006 ($400,000) divided by total taxable income for 2006 ($480,000) = .8333

Taxable income for first 5 months of 2007 ($795,000) divided by total taxable income for 2007 ($960,000) = .8281

Taxable income for first 5 months of 2008 ($1,600,000) divided by total taxable income for 2008 ($1,920,000) = .8333

Add this paragraph (e), Example (v)(B), (C), and (D) and divide by 3 = .8316

Divide this paragraph (e), Example (v)(A) by this paragraph (e), Example (v)(E) = $3,547,379

Determine the tax on this paragraph (e), Example (v)(F) = $1,206,109

Taxable income for first 6 months of 2006 ($420,000) divided by total taxable income for 2006 ($480,000) = .875

Taxable income for first 6 months of 2007 ($840,000) divided by total taxable income for 2007 ($960,000) = .875

Taxable income for first 6 months of 2008 ($1,680,000) divided by total taxable income for 2008 ($1,920,000) = .875

Add this paragraph (e), Example (v)(H), (I), and (J) and divide by 3 = .875

Multiply this paragraph (e), Example (v)(G) by this paragraph (e), Example (v)(K) = $1,055,345

100% of this paragraph (e), Example (v)(L) = $1,055,345

Amount of all prior required installments for 2009 = $163,200

Amount of adjusted seasonal installment for the second installment payment (this paragraph (e), Example (v)(M) less this paragraph (e), Example (v)(N)) = $892,145

To determine the amount of the third installment under the rules of section 6655(e)(3) and paragraph (a) of this section, the following computation is necessary:

Taxable income for first 8 months of 2009 = $3,250,000

Taxable income for first 8 months of 2006 ($440,000) divided by total taxable income for 2006 ($480,000) = .9167

Taxable income for first 8 months of 2007 ($880,000) divided by total taxable income for 2007 ($960,000) = .9167

Taxable income for first 8 months of 2008 ($1,760,000) divided by total taxable income for 2008 ($1,920,000) = .9167

Add this paragraph (e), Example (vi)(B), (C), and (D) and divide by 3 = .9167

Divide this paragraph (e), Example (vi)(A) by this paragraph (e), Example (vi)(E) = $3,545,326

Determine the tax on this paragraph (e), Example (vi)(F) = $1,205,411

Taxable income for first 9 months of 2006 ($450,000) divided by total taxable income for 2006 ($480,000) = .9375

Taxable income for first 9 months of 2007 ($900,000) divided by total taxable income for 2007 ($960,000) = .9375

Taxable income for first 9 months of 2008 ($1,800,000) divided by total taxable income for 2008 ($1,920,000) = .9375

Add this paragraph (e), Example (vi)(H), (I), and (J) and divide by 3 = .9375

Multiply this paragraph (e), Example (vi)(G) by this paragraph (e), Example (vi)(K) = $1,130,073

100% of this paragraph (e), Example (vi)(L) = $1,130,073

Amount of all prior required installments for 2009 = $576,300

Amount of adjusted seasonal installment for the third installment payment (this paragraph (e), Example (vi)(M) less this paragraph (e), Example (vi)(N)) = $553,773

To determine the amount of the fourth installment under the rules of section 6655(e)(3) and paragraph (a) of this section, the following computation is necessary:

Taxable income for first 11 months of 2009 = $3,370,000

Taxable income for first 11 months of 2006 ($470,000) divided by total taxable income for 2006 ($480,000) = .9792

Taxable income for first 11 months of 2007 ($940,000) divided by total taxable income for 2007 ($960,000) = .9792

Taxable income for first 11 months of 2008 ($1,880,000) divided by total taxable income for 2008 ($1,920,000) = .9792

Add this paragraph (e), Example (vii)(B), (C), and (D) and divide by 3 = .9792

Divide this paragraph (e), Example (vii)(A) by this paragraph (e), Example (vii)(E) = $3,441,585

Determine the tax on this paragraph (e), Example (vii)(F) = $1,170,139

Taxable income for first 12 months of 2006 ($480,000) divided by total taxable income for 2006 ($480,000) = 1.0000

Taxable income for first 12 months of 2007 ($960,000) divided by total taxable income for 2007 ($960,000) = 1.0000

Taxable income for first 12 months of 2008 ($1,920,000) divided by total taxable income for 2008 ($1,920,000) = 1.0000

Add this paragraph (e), Example (vii)(H), (I), and (J) and divide by 3 = 1.0000

Multiply this paragraph (e), Example (vii)(G) by this paragraph (e), Example (vi)(K) = $1,170,139

100% of this paragraph (e), Example (vii)(L) = $1,170,139

Amount of all prior required installments for 2009 = $864,450

Amount of adjusted seasonal installment for the fourth installment payment (this paragraph (e), Example (vii)(M) less this paragraph (e), Example (vii)(N)) = $305,689

Because the total amount of each required estimated tax payment determined under section 6655(e)(3) and paragraph (a) of this section exceeds the amount of each required estimated tax payment determined under section 6655(d) and § 1.6655-1(d) and (e), the exception described in section 6655(e) and this section does not apply and the addition to the tax with respect to the underpayment for the June 15, 2009, and September 15, 2009, installments will be imposed unless another exception (for example, see section 6655(e)(2)) applies with respect to these installments.

Effective/applicability date. This section applies to taxable years beginning after September 6, 2007.