Form Mo-1040 And Mo-A Instructions - Missouri Department Of Revenue

result in the disallowance of the modifica-

that it was reported in your federal

combined return. Nonresident active

tion.

adjusted gross income.

duty military servicemembers who are

required to file a 2006 Missouri return

4. Capital Gain Exclusion on Sale of Low

Railroad Retirement Benefits Administered

may subtract the military income re-

Income Housing. If during 2006, you

by the Railroad Retirement Board, such as

ceived from their federal adjusted

sold a federally subsidized (HUD) low

all Tier I and Tier II benefits and any railroad

gross income.

income housing project to a nonprofit

retirement sick pay, disability, and unem-

or governmental organization, and at

Attach a copy of the Form W-2 re-

ployment benefits, included in federal ad-

least 40 percent of the units are occu-

porting your military income.

justed gross income (Form MO-1040, Line

pied by persons or families having

1), are exempt from state taxation.

8. Combat Pay Included in Federal

incomes of 60 percent or less of the

Adjusted Gross Income Earned by

If you have other sources of negative adjust-

median income, you may exclude 25

Military Personnel with a Missouri

ments, indicate the source on the line pro-

percent of the capital gain from

Home of Record.

The IRS allows

vided. Other sources of negative adjustments

Missouri tax. However, the buyer of

enlisted members, warrant officers

may be:

the property must agree to preserve or

and commissioned warrant officers to

increase the low income occupancy of

1. Contributions into a Missouri Individ-

exclude their military pay received

the project. To use this exclusion, enter

ual Medical Account (IMA). Contribu-

while serving in a combat zone, or

as “other” 25 percent of the capital gain

tions that were made by your employer

while hospitalized as a result of in-

reported on your Federal Form 1040.

into an Individual Medical Account

juries incurred while serving in a

Attach a copy of your Federal Form

(IMA) and used to pay your health care

combat zone. The exclusion of com-

1040 (pages 1 and 2), Federal Form

expenses are exempt from Missouri

bat pay received by a commissioned

4797, and an explanation.

income tax.

The interest income

officer (other than a commissioned

earned on the IMA account is also

5. Family Development Account.

warrant officer) is limited to the high-

exempt from Missouri income tax. The

family development account holder

est rate of enlisted pay. Subtract all

IMA contribution is identified in Box 14

may subtract the amount of annual

military income received while serv-

of your Form W-2, Wage and Tax

deposits made to the account (not to

ing in a combat zone, which is

Statement. Reduce the amount of con-

exceed $2,000).

Approved with-

included in Federal Adjusted Gross

tributions by the amount of medical

drawals from the family development

Income (FAGI) and is not otherwise

and dental expenses deducted on

account are also exempt from state

excluded. In most cases combat pay

Federal Form 1040, Schedule A, Line 4,

tax. Interest earned by a family devel-

is not included in Box 1, Wages, of

but paid for by the IMA and included in

opment account is exempt from state

Form W-2 and therefore is not includ-

Missouri itemized deductions.

taxation and may be subtracted from

ed in FAGI. However if Box 1 in-

an account holder’s federal adjusted

2. Additional Capital Gain Deduction

cludes combat pay, the portion con-

gross income. Any money withdrawn

Due to Difference in Basis. If during

sisting of combat pay may be taken as

for an unapproved use is subject to

the taxable year you realized a gain

a subtraction for Missouri purposes.

tax. Attach proper certification and a

from the sale of property or other cap-

EXAMPLE 1: A resident of Missouri, is

copy of your Form 1099.

ital assets that had a higher tax basis

an enlisted member of the military.

for Missouri tax purposes than for fed-

6. Federally Taxable—Missouri Exempt

He enters a combat zone in July and is

eral tax purposes, you may exclude

Obligations. The amount of any bond

there through December. He earns

the gain or the difference in the basis

issued by the Missouri Higher Educa-

$12,000 January through June, and

of the property so disposed, whichev-

tion Loan Authority (MOHELA) in-

earns

$20,000

July

through

er is smaller. If the gain was consid-

cluding interest or proceeds resulting

December. Box 1 of his Form W-2

ered a long-term capital gain for fed-

from the sale of the bond is exempt

should only indicate the $12,000 he

eral income tax purposes, the exclu-

from Missouri tax. If the amount is

received prior to entering the combat

sion is limited to the gain or 50 per-

included in federal adjusted gross

zone. He is not entitled to a subtrac-

cent of the difference, whichever is

income, the amount can be subtract-

tion, as his combat pay is not includ-

smaller. No difference in basis can be

ed for Missouri tax purposes pursuant

ed in his FAGI.

claimed for any property obtained

to Section 173.440, RSMo.

EXAMPLE 2: A resident of Missouri, is

after December 31, 1972.

If your

7. Military Income of Nonresident

a high-ranking commissioned officer.

basis for Missouri purposes is less than

Military Personnel. Enter the amount

He enters a combat zone in July and is

the basis for federal income tax pur-

of any military income received by

there through December. He earns

poses, no adjustment is required.

nonresident military personnel sta-

$50,000 January through June, and

3. Accumulation Distribution. If during

tioned in Missouri. The Civil Relief

earns

$70,000

July

through

2006, you received a distribution as

Act, H.R. 100, prohibits states from

December. The IRS limits his exclu-

beneficiary of a trust that was made

including the military income of a

sion to $40,000, causing Box 1 of his

from accumulated earnings of prior

nonresident servicemember when

Form W-2 to indicate $80,000. He is

years and you filed Federal Form

determining the individual income tax

entitled to a subtraction of $30,000,

4970, the amount may be excluded

rate for either the servicemember or

which represents the portion of Box 1

from Missouri income to the extent

the servicemember's spouse on a

FORM MO-NFT, No Franchise Tax Due

Form MO-NFT is only for corporations. Complete Form MO-NFT and attach to your individual income tax return (Form

MO-1040) if your corporation's assets or apportioned assets are $1,000,000 or less and no corporation franchise tax is

due. Note: If a corporation fails or neglects to file a Missouri corporation franchise tax report pursuant to Chapter 147,

the Director of Revenue will notify the secretary of state to begin administrative dissolution proceedings.

Form Mo-1040 And Mo-A Instructions - Missouri Department Of Revenue - 2006 Page 10

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