Arizona Form 140 - Resident Personal Income Tax Return

Form 140

election.

(See the instructions for “Other Additions to

N. Adjustment for IRC § 179 Expense Not Allowed

Income.”) If you made the required addition to Arizona

Enter 20% of the amount entered on line B10. This same

income on the Arizona return filed for the year in which you

amount can also be subtracted in each of the following four

reacquired the debt instrument (2009 or 2010), Arizona will

taxable years, effectively amortizing the difference in

not tax that DOI income twice. In the year in which you

treatment over five years. If you made an addition for IRC §

include that deferred DOI income in you federal adjusted

179 expense on your, 2006, 2007, 2008 and/or 2009 return,

gross income, you may take a subtraction for the amount

also enter 20% of the amount added for 2006, 2007, 2008

included for that year. Usually this subtraction will apply to

and/or 2009.

taxable years 2014 through 2018. However, if you had to

accelerate the deferral for federal purposes, this subtraction

O. Contributions to 529 College Savings Plans

may apply to a taxable year prior to 2014. On line C29,

For taxable years 2008 through 2012, you may subtract

enter the amount of previously deferred DOI income that

amounts you contribute to 529 college savings plans during

you included in your federal adjusted gross income for the

the taxable year. You may subtract the amount you

current taxable year to the extent that the amount was

contributed during the year up to a total of $750 ($1,500 for

previously added to your Arizona income.

a married couple filing a joint return). If you are married

filing separate returns, either you or your spouse may take

Q. Original Issue Discount (OID) on Reacquisition

the subtraction, or you may divide it between you, but the

of Debt Instrument

total taken by both of you cannot be more than $1,500.

For federal purposes, when a taxpayer made the special

If you contribute more than $750 ($1,500 if married) during

election to defer DOI income under I.R.C. § 108(i) (see letter

the year, your total subtraction is still limited to $750

“P” above), the taxpayer was not allowed to take a deduction

($1,500 if you are married). For example, Jorge and Kate are

with respect to the portion of any OID that accrued with respect

married and have two children. During 2010, Jorge and

to that DOI income, during the income deferral period. In this

Kate, contributed $1,500 to a 529 plan for Child 1 and

case, the taxpayer must deduct the aggregate amount of the

$1,500 to a 529 plan for Child 2. Even though Jorge and

OID deductions disallowed ratably over a 5 year period,

Kate contributed a total of $3,000 during 2010, they may

beginning with the period in which the income is includible in

subtract only $1,500 on their 2010 return.

federal adjusted gross income.

You may take a subtraction for a contribution that you made

Arizona did not adopt the federal provisions requiring a

during 2010, to a plan that existed before 2010. You may

taxpayer to defer the OID deduction in cases where the

take a subtraction for a contribution that you made during

taxpayer federally deferred the DOI income under I.R.C. §

2010, to a plan established in another state. You may take a

108(i). For Arizona purposes, you were required to add the

subtraction for a contribution that you made in 2010, to any

amount of deferred DOI income to Arizona income on the

529 college savings plan. This could be a plan established

return filed for the year in which you reacquired the debt

for a child, grandchild, niece, nephew, or any other person

instrument. Since Arizona is taxing the federally deferred

for whom a plan has been established.

DOI income for 2009 or 2010 on your 2009 or 2010 Arizona

You cannot take a subtraction for an amount transferred

return, you may subtract the amount of OID that accrued

from one college savings plan to a different college savings

during the taxable year with respect to that DOI income. On

plan (a rollover).

line C29, enter the amount of any OID that was deferred and

not allowed to be deducted in computing your federal adjusted

P. Previously Deferred Discharge of Indebtedness

gross income for 2010 under I.R.C. § 108(i).

(DOI) Income Adjustment

Generally, when a loan is settled for less than the amount

R. Other Adjustments

owed, DOI income is realized by the debtor and usually

Other special adjustments may be necessary. Call one of the

must be included in the debtor’s gross income. The amount

numbers listed on the back cover if any of the following apply.

of DOI income is generally equal to the amount of loan



You are a qualified defense contractor that elected to

forgiveness.

DOI income also occurs when a debtor

amortize under Arizona Revised Statutes section 43-1024.

repurchases his or her own debt at a discount (a price lower



You sold or disposed of property that was held for the

than the adjusted basis issue price of the debt instrument).

production of income and your basis was computed

In debt repurchase transactions, the amount of DOI income

under the Arizona Income Tax Act of 1954.

is generally equal to the difference between the adjusted



You were an Arizona resident before December 31, 1975,

issue price and the price paid for the debt instrument.

and you are receiving IRA distributions from your IRA

For federal purposes, a taxpayer may have made a special

account to which you made contributions before

election for taxable years 2009 or 2010 to include DOI

December 31, 1975.

income in connection with the reacquisition of a business



You were an Arizona resident before December 31, 1975,

debt instrument, ratably over a 5 year period. A taxpayer

and you are receiving distributions from your qualified

that made this election will generally include this income in

self-employment retirement plan to which you made

federal adjusted gross income beginning with the 2014

contributions before December 31, 1975.

taxable year.

A taxpayer would have made the federal



You deferred exploration expenses determined under

election under I.R.C. § 108(i) as added by the American

Internal Revenue Code section 617 in a taxable year

Recovery and Reinvestment Act of 2009.

ending before January 1, 1990, and you have not

Arizona did not adopt the special federal DOI income

previously taken a subtraction for those expenses.

deferral provisions for the 2009 or 2010 taxable year. For

Line C30 - Total Subtractions

Arizona purposes, if you made the federal election to defer

the inclusion of DOI income under I.R.C. § 108(i), you were

Add lines C17 through C29. Enter the total here and on the

required to add the amount of deferred DOI income to

front of your return on line 15.

Arizona income for the year for which you made the

Arizona Form 140 - Resident Personal Income Tax Return - 2010 Page 14

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