Arizona Form 140nr - Nonresident Personal Income Tax Return - 2011 Page 15
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37Form 140NR
K. Previously Deferred Discharge of Indebtedness
H.
Basis
Adjustment
for
Property
Sold
or
(DOI) Income Adjustment
Otherwise Disposed of During the Taxable Year
Generally, when a loan is settled for less than the amount
With respect to property used in an Arizona business that is
owed, DOI income is realized by the debtor and usually
sold or otherwise disposed of during the taxable year by a
must be included in the debtor’s gross income. The amount
taxpayer who has complied with the requirement to add back
of DOI income is generally equal to the amount of loan
all depreciation with respect to that property on tax returns
forgiveness.
DOI income also occurs when a debtor
for all taxable years beginning from and after December 31,
repurchases his or her own debt at a discount (a price lower
1999, enter the amount of depreciation that has been allowed
than the adjusted basis issue price of the debt instrument).
pursuant to I.R.C. § 167(a) to the extent that the amount has
In debt repurchase transactions, the amount of DOI income
not already reduced Arizona taxable income in the current or
is generally equal to the difference between the adjusted
prior years. (Note: The practical effect of this is to allow a
issue price and the price paid for the debt instrument.
subtraction for the difference in basis for any asset for which
bonus depreciation has been claimed on the federal return.)
For federal purposes, a taxpayer may have made a special
You may make this adjustment for only property that was
election for taxable years 2009 or 2010 to include DOI
used in your Arizona business.
income in connection with the reacquisition of a business
debt instrument, ratably over a 5 year period. A taxpayer
I. Fiduciary Adjustment
that made this election will generally include this income in
If the amount on Form 141AZ, Schedule K-1(NR), line 5, is
federal adjusted gross income beginning with the 2014
a negative number, enter that amount as a subtraction from
taxable year.
A taxpayer would have made the federal
income on line D31.
election under I.R.C. § 108(i) as added by the American
Recovery and Reinvestment Act of 2009.
J. Net Operating Loss Adjustment.
Arizona did not adopt the special federal DOI income deferral
NOTE: This subtraction applies to only those individuals
provisions for the 2009 or 2010 taxable year. For Arizona
who made an election under the special federal net
purposes, if you made the federal election to defer the
operating loss rules for 2008 and 2009. Under the special
inclusion of Arizona source DOI income under I.R.C. §
rules for 2008 and 2009, you could have elected to carry the
108(i), you were required to add the amount of that deferred
net operating loss back for 3, 4 or 5 years, instead of the
DOI income to Arizona income for the year for which you
normal 2 years. This election would have been allowed
made the election. If you made the required addition to
under I.R.C. § 172(b)(1)(h) as amended by the American
Arizona income on the Arizona return filed for the year in
Recovery and Reinvestment Act of 2009 or the Worker,
which you reacquired the debt instrument (2009 or 2010),
Homeownership, and Business Assistance Act of 2009.
Arizona will not tax that Arizona source DOI income twice.
Arizona did not adopt the special federal net operating loss
In the year in which you include that deferred Arizona source
rules for losses incurred during 2008 or 2009. For Arizona
DOI income in your federal adjusted gross income, and
purposes, you must deduct an Arizona source net operating
likewise your Arizona gross income, you may take a
loss as if the loss was computed under I.R.C. § 172 in effect
subtraction for the amount included for that year. Usually this
prior to the enactment of those special rules. If you made an
subtraction will apply to taxable years 2014 through 2018.
election to deduct your 2008 or 2009 federal net operating
However, if you had to accelerate the deferral for federal
loss under I.R.C. § 172(b)(1)(h), you may have to enter an
purposes, this subtraction may apply to a taxable year prior to
amount here. Figure how much of the net operating loss
2014. On line D31, enter the amount of previously deferred
carry forward would have been allowed as a deduction on
Arizona source DOI income that you included in your Arizona
your 2011 federal income tax return, if the election described
gross income for the current taxable year to the extent that the
in I.R.C. § 172(b)(1)(h) had not been made in the year of the
amount was previously added to your Arizona income.
loss. Then figure how much of the carry forward computed
under that method was derived from Arizona source losses.
L. Original Issue Discount (OID) on Reacquisition
The amount you may take as a subtraction is the difference
of Debt Instrument
between the amount of Arizona source net operating loss
For federal purposes, when a taxpayer made the special election
carryover allowable as a deduction for federal purposes
to defer DOI income under I.R.C. § 108(i), the taxpayer was not
under the as if calculation and the amount of the Arizona
allowed to take a deduction with respect to the portion of any
source net operating loss deduction actually taken for federal
OID that accrued with respect to that DOI income, during the
purposes that you included in your Arizona gross income.
income deferral period. In this case, the taxpayer must deduct
On line D31, enter the amount of allowable Arizona source
the aggregate amount of the OID deductions disallowed ratably
loss carry forward deduction that exceeds the actual amount
over a 5 year period, beginning with the period in which the
of Arizona source net operating loss carry forward deduction
income is includible in federal adjusted gross income.
that was deducted in arriving at Arizona gross income.
Arizona did not adopt the federal provisions requiring a taxpayer
NOTE: As an Arizona nonresident, you may have had a loss
to defer the OID deduction in cases where the taxpayer federally
from prior year Arizona business operations. However, the
deferred the DOI income under I.R.C. § 108(i). For Arizona
loss cannot offset this year’s income unless the as if
purposes, you were required to add the amount of deferred
calculation results in an Arizona source net operating loss
Arizona source DOI income to Arizona gross income on the
deduction for federal purposes.
You can only take this
return filed for the year in which you reacquired the debt
subtraction if the as if federal net operating loss deduction for
instrument. Since Arizona is taxing the federally deferred
2011 includes Arizona source losses that have not been
Arizona source income for 2009 or 2010 on your 2009 or 2010
absorbed by non-Arizona income in any intervening years.
Arizona return, you may subtract the amount of OID that
You cannot subtract any amount of that net operating loss that
accrued during the taxable year with respect to that Arizona
has been absorbed by non-Arizona income in any intervening
source DOI income. On line D31, enter the amount of any OID
years. You also cannot take a subtraction for any amount that
related to that Arizona source income that was deferred and not
has already been deducted for Arizona purposes.
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