Instructions For Arizona Form 140 - Resident Personal Income Tax Return

Form 140

is generally equal to the difference between the adjusted

1. You must be engaged in the business of farming or

issue price and the price paid for the debt instrument.

processing agricultural crops.

For federal purposes, a taxpayer may have made a special

2. The crop must be grown in Arizona.

election for taxable years 2009 or 2010 to include DOI

3. You made your gift to a charitable organization

income in connection with the reacquisition of a business

located in Arizona that is exempt from Arizona

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

income tax.

that made this election will generally include this income in

federal adjusted gross income beginning with the 2014

The subtraction is the larger of 80% of the wholesale market

taxable year.

A taxpayer would have made the federal

price or 80% of the most recent sale price for the contributed

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

crop.

Recovery and Reinvestment Act of 2009.

To determine if your crop gift qualifies for this subtraction, see

Arizona Department of Revenue Income Tax Procedure ITP 93-2.

Arizona did not adopt the special federal DOI income

deferral provisions for the 2009 or 2010 taxable year. For

Basis

Adjustment

for

Property

Sold

Arizona purposes, if you made the federal election to defer

Otherwise Disposed of During the Taxable Year

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

With respect to property that is sold or otherwise disposed

required to add the amount of deferred DOI income to

of during the taxable year by a taxpayer who has complied

Arizona income for the year for which you made the

with the requirement to add back all depreciation with

election.

If you made the required addition to Arizona

respect to that property on tax returns for all taxable years

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

beginning from and after December 31, 1999, enter the

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

amount of depreciation that has been allowed pursuant to

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

I.R.C. § 167(a) to the extent that the amount has not already

include that deferred DOI income in you federal adjusted

reduced Arizona taxable income in the current or prior

gross income, you may take a subtraction for the amount

years. (Note: The practical effect of this is to allow a

included for that year. Usually this subtraction will apply to

subtraction for the difference in basis for any asset for which

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

bonus depreciation has been claimed on the federal return.)

accelerate the deferral for federal purposes, this subtraction

N. Contributions to 529 College Savings Plans

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

enter the amount of previously deferred DOI income that

For taxable years 2008 through 2012, you may subtract

you included in your federal adjusted gross income for the

amounts you contribute to 529 college savings plans during

current taxable year to the extent that the amount was

the taxable year. You may subtract the amount you

previously added to your Arizona income.

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

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

P. Original Issue Discount (OID) on Reacquisition

filing separate returns, either you or your spouse may take

of Debt Instrument

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

For federal purposes, when a taxpayer made the special

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

election to defer DOI income under I.R.C. § 108(i), the

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

taxpayer was not allowed to take a deduction with respect to

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

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

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

income, during the income deferral period. In this case, the

married and have two children. During 2011, Jorge and

taxpayer must deduct the aggregate amount of the OID

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

deductions disallowed ratably over a 5 year period, beginning

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

with the period in which the income is includible in federal

Kate contributed a total of $3,000 during 2011, they may

adjusted gross income.

subtract only $1,500 on their 2011 return.

Arizona did not adopt the federal provisions requiring a

You may take a subtraction for a contribution that you made

taxpayer to defer the OID deduction in cases where the

during 2011, to a plan that existed before 2011. You may

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

take a subtraction for a contribution that you made during

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

2011, to a plan established in another state. You may take a

amount of deferred DOI income to Arizona income on the

subtraction for a contribution that you made in 2011, to any

return filed for the year in which you reacquired the debt

529 college savings plan. This could be a plan established

instrument. Since Arizona is taxing the federally deferred

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

DOI income for 2009 or 2010 on your 2009 or 2010

for whom a plan has been established.

Arizona return, you may subtract the amount of OID that

You cannot take a subtraction for an amount transferred

accrued during the taxable year with respect to that DOI

from one college savings plan to a different college savings

income. On line C29, enter the amount of any OID that was

plan (a rollover).

deferred and not allowed to be deducted in computing your

federal adjusted gross income for 2011 under I.R.C. § 108(i).

O. Previously Deferred Discharge of Indebtedness

(DOI) Income Adjustment

Q. Other Adjustments

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

Other special adjustments may be necessary. Call one of the

owed, DOI income is realized by the debtor and usually

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

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



You are a qualified defense contractor that elected to

of DOI income is generally equal to the amount of loan

amortize under Arizona Revised Statutes section 43-1024.

forgiveness.

DOI income also occurs when a debtor



You sold or disposed of property that was held for the

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

production of income and your basis was computed

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

under the Arizona Income Tax Act of 1954.

In debt repurchase transactions, the amount of DOI income

Instructions For Arizona Form 140 - Resident Personal Income Tax Return - 2011 Page 13

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