Instructions For Arizona Form 140 - Resident Personal Income Tax Return

Form 140

Members of the reserves or the National Guard may subtract

NOTE: Enter only the taxable amount (the amount that was

pay received for active service as a reservist or as a National

subject to federal tax). Do not include any amount that was

Guard member. This includes pay received for weekend or

not subject to federal income tax.

two-week training periods. On line C27, enter the amount of

See Arizona Department of Revenue Income Tax Ruling ITR 96-1

that income included in your federal adjusted gross income.

for more information about railroad retirement benefits.

NOTE: You may not subtract pay received for active duty

Line C22 - Recalculated Arizona Depreciation

service as a member of the U.S. Public Health Service or

Enter the total amount of depreciation allowable pursuant to

NOAA. The department has issued a ruling on this issue.

IRC § 167(a) for the taxable year calculated as if you had

This ruling is ITR 10-1. To see this ruling, visit our web site

elected not to claim bonus depreciation for eligible

at and click on legal research and then click

properties for federal purposes.

on rulings.

Line C23 - Certain Wages of American Indians

Line C28 – Net Operating Loss Adjustment

Enrolled members of American Indian tribes may subtract wages

NOTE: This subtraction applies to only those individuals

earned while living and working on their tribe's reservation.

who made an election under the special federal net

The federal government must recognize these tribes.

operating loss rules for 2008 and 2009. Under the special

For more information, see Arizona Department of Revenue

rules for 2008 and 2009, you could have elected to carry the

Income Tax Ruling ITR 96-4.

net operating loss back for 3, 4 or 5 years, instead of the

Line C24 - Income Tax Refund from Other

normal 2 years. This election would have been allowed

States

under I.R.C. § 172(b)(1)(h) as amended by the American

Recovery and Reinvestment Act of 2009 or the Worker,

You may subtract income tax refunds received from other

Homeownership, and Business Assistance Act of 2009.

states if both of the following apply.

Arizona did not adopt the special federal net operating loss

You reported the refund as income on your federal return.

rules for losses incurred during 2008 or 2009. For Arizona

2. You did not deduct the taxes paid to the other state as

purposes, you must deduct a net operating loss as if the loss

an itemized deduction on a prior year Arizona return.

was computed under I.R.C. § 172 in effect prior to the

enactment of those special rules. If you made an election to

Line

C25

Deposits

and

Employer

deduct your 2008 or 2009 federal net operating loss under

Contributions Into MSAs

I.R.C. § 172(b)(1)(h), you may have to enter an amount

Deposits Made Into Your MSA

here. Figure how much of the net operating loss carry

forward would have been allowed as a deduction on your

If you have a medical savings account (MSA), you may be

2011 federal income tax return, if the election described in

able to subtract deposits made into that MSA. Make an entry

I.R.C. § 172(b)(1)(h) had not been made in the year of the

here if all of the following apply.

loss. On line C28, enter the amount that exceeds the actual

1. You have an MSA that qualifies as an MSA under

net operating loss carry forward that was deducted in

Arizona law, but not federal law.

arriving at federal adjusted gross income.

2. Either you or your employer made deposits into that

Line C29 - Other Subtractions from Income

MSA during the tax year.

Use line C29 if any of the following special circumstances

3. You had to include the deposits in income on your

apply. Attach your own schedule to the back of your return

federal income tax return.

explaining any amounts entered here.

Enter the amount of the MSA deposits that you had to

Previously Reported

Gain

on Decedent's

include in your federal adjusted gross income.

Installment Sale

Employer Contributions Made to Employee MSAs

Prior Arizona law required acceleration of any unrecognized

If you are an employer, you may subtract the amount

installment sale gain upon the death of a taxpayer. However,

contributed to your employees' MSAs that are established

this acceleration could have been avoided by the posting of a

under Arizona law. You can subtract these contributions

bond. If acceleration was required, your federal adjusted gross

only to the extent not deductible for federal income tax

income may include installment sale amounts already

purposes. Enter these contributions here.

recognized on a decedent's final Arizona return. If your federal

Line C26 - Adjustment for IRC § 179

adjusted gross income includes such amounts, you may

Expense not Allowed

subtract that portion of the gain included on your federal return.

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

B. Fiduciary Adjustment

can also be subtracted in each of the following four taxable

A fiduciary uses Form 141AZ, Schedule K-1 to report to you

years, effectively amortizing the difference in treatment over

your share of the fiduciary adjustment from the trust or estate.

five years. If you made an addition for IRC § 179 expense

on your, 2007, 2008, 2009 and/or 2010 return, also enter

Line 3 of Form 141AZ, Schedule K-1 shows your share of

20% of the amount added for 2007, 2008, 2009 and/or 2010

the fiduciary adjustment from the estate or trust. If the

amount reported on line 3 of your Arizona Form 141AZ,

Line C27 - Pay Received for Active Service

Schedule K-1, is a negative number, enter that amount as a

as a Member of the Reserves, National

subtraction. Enter the subtraction on line C29.

Guard or the U.S. Armed Forces

If the amount reported on line 3 of your Arizona Form 141AZ,

Members of the U.S. armed forces may subtract pay received

Schedule K-1, is a positive number, enter that amount as an

for active duty military service. On line C27, enter the amount

addition. Enter the addition on line B11.

of that income included in your federal adjusted gross income.

Instructions For Arizona Form 140 - Resident Personal Income Tax Return - 2011 Page 11

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