Instructions For Arizona Form 140 - Resident Personal Income Tax Return

Form 140

which you claim the credit. If you take this credit, enter the amount

2. A withdrawal made as the result of the death or

of such expenses that you deducted on your federal return.

disability of the designated beneficiary of an account.

3. A withdrawal that is made on the account of a

K. Wage Expense for Employers of TANF Recipients

scholarship, or the allowance or payment described in

If you take a credit for employing TANF recipients (Form

section 135(d)(1)(B) or (C) of the internal revenue

320), you cannot deduct any wage expense for which you

code, and that is received by the designated beneficiary,

claim the credit. If you take this credit, enter the amount of

but only to the extent of the amount of this scholarship,

such expenses that you deducted on your federal return.

allowance or payment.

L. Motion Picture Expenses

4. A rollover or change of designated beneficiary.

If you take a motion picture credit on Form 334, you cannot

Q. Original Issue Discount (OID) on Reacquisition

deduct any expenses deducted on your federal return related

of Debt Instrument

to the production or related to a transferred credit. Enter the

amount of any such expenses that were deducted in

For federal purposes, when a taxpayer made the special

computing federal adjusted gross income for which you

election to defer discharge of indebtedness (DOI) income under

claimed a credit.

I.R.C. § 108(i) (for 2009 or 2010), the taxpayer was not

allowed to take a deduction with respect to the portion of any

M. Agricultural Water Conservation System Credit

OID that accrued with respect to that DOI income, during the

If you take this credit (Form 312), you cannot deduct any

income deferral period. In this case, the taxpayer had to deduct

expenses for which you claim the credit. If you take this credit,

the aggregate amount of the OID deductions disallowed ratably

enter the amount of such expenses that you deducted on your

over a 5 year period, beginning with the period in which the

federal return.

income was includible in federal adjusted gross income.

N. Adjusted Basis in Property for Which You Have

Arizona did not adopt the federal provisions requiring a

taxpayer to defer the OID deduction in cases where the

Claimed a Credit for Investment in Qualified Small

taxpayer federally deferred the DOI income. For Arizona

Businesses

purposes, you had to report the DOI income from a debt

If you claim a credit for an investment in a qualified small

reacquisition in the year in which you reacquired the debt, and

business on Arizona Form 338, you must adjust your basis in

you were allowed to subtract any OID related to that DOI

the investment by the amount of the credit claimed. You must

income in the year the OID accrued. If your federal adjusted

report this difference in basis on the Arizona return that you

gross income includes a deduction for any accrued OID that

file for the taxable year in which you sell or otherwise

you have already subtracted for Arizona purposes, you must

dispose of the investment. If you sold or otherwise disposed

make an addition to Arizona income for the amount of

of the investment during the 2011 taxable year, on line B11,

deferred OID deducted on your federal return. Generally, this

enter the amount by which the adjusted basis computed under

addition will not apply until taxable year 2014 through 2018.

the internal revenue code with respect to that property

However, if you were required to accelerate reporting of the

exceeds the adjusted basis of the property computed under

DOI income for federal purposes and were allowed to deduct

Arizona Revised Statutes section 43-1074.02.

accrued OID attributable to that income on a return filed for a

year prior to 2014, this addition may apply to an earlier year.

O. Depreciation or Amortization for a Water

On line B11, enter the amount of any previously deferred OID

Conservation System

that you deducted in computing your 2011 federal adjusted

If you claimed a water conservation system credit on

gross income, to the extent that the amount was previously

Arizona Form 339, you may not deduct any depreciation or

subtracted from Arizona gross income.

amortization for that system on your Arizona return. Enter

R. Early Withdrawal of Arizona, County, City, or

the amount of depreciation or amortization claimed on your

federal return for the water conservation system for which

School Retirement System Contributions

you have claimed a credit.

If you meet all of the following, you must enter an amount here.

P. Nonqualified Withdrawals from 529 College

1. You left your job with the State of Arizona or an

Savings Plans

Arizona county, city, or school district for reasons other

than retirement.

You must make an addition to income if both of the

following apply to you.

2. When you left, you took out the contributions you had

made to the retirement system while employed.

1. You received a nonqualified withdrawal from a 529

college savings plan.

3. You deducted these contributions on your Arizona

income tax returns that you filed for prior years.

2. You did not include the amount of the withdrawal in

your federal adjusted gross income.

4. You did not include these contributions in your federal

adjusted gross income this year.

The amount that you must add is the amount withdrawn, but

no more than the difference between the amount of

If you meet all these tests, you must report as income those

contributions subtracted in prior years and the amount added

contributions previously deducted on your prior years'

in any prior years.

Arizona tax returns.

A nonqualified withdrawal is a withdrawal other than any of

For details, see Arizona Department of Revenue Income Tax

the following:

Ruling ITR 93-7.

1. A qualified withdrawal. A qualified withdrawal is a

S. Other Adjustments

withdrawal from an account to pay the qualified higher

Other special adjustments may be necessary. You may need

education expenses of the designated beneficiary of the

to make an addition for depreciation or amortization. You

account.

may also need to make an addition if you claimed certain tax

Instructions For Arizona Form 140 - Resident Personal Income Tax Return - 2011 Page 9

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