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Federal Changes Not Adopted by Minnesota

Definitions used in determining Minnesota

If you claimed the modified treatment

Update as of January 2017

If you expensed up to the first 50%

taxable income are based on the Internal

of certain qualified film and television

of the cost of qualified mine safety

A bill signed into law on

Revenue Code, as amended through Decem-

production expenses on federal Form

equipment, calculate the depreciation

January 13, 2017, conforms

ber 31, 2014.

4562, recalculate your expenses for Min-

on the portion of the equipment you

Minnesota law to federal law

nesota purposes and enter the difference.

expensed. Enter the difference between

Since that date, federal tax laws have been

when determining federal taxable

Individual taxpayer enter this amount on

the amount expensed and the amount

passed that contain a number of provisions

line 8 of Schedule M1NC.

income for tax year 2016. As a

allowed as depreciation on the cor-

affecting tax year 2016. Minnesota has not

result, taxpayers are no longer

responding line. Individual taxpayers

adopted these federal changes.

If you placed into service certain quali-

required to recompute Minnesota

enter this amount on line 11 of Schedule

fied leasehold improvements, restaurant

The following codes will reference a non-

M1NC

taxable income for Minnesota tax

or retail improvement property and

conformity issue, which will require an

deprecated the property using a 15 year

purposes.

40 Other Additions. Attach a supplemental

adjustment to Minnesota Income. Place the

class life, recalculate your Minnesota

statement with your return regarding

code in the box and the amount on the cor-

depreciation using a 39 year class life and

your addition.

responding line. If you need additional lines,

enter the difference. Individual taxpayers

attach a supplemental schedule.

enter this amount on line 9 of Scheduled

M2, Line 38; M2SB, Line 25;

M2, Line 31; M2SB, Line 18;

M1NC.

M2X Line 43

M2X, Line 36

Code Description of Issue

If you utilized the special 7 year cost

Code Description of Issue

50 Other subtractions. Attach a supple-

recovery period for property used for

If you claimed depreciation for busi-

mental statement with your return

land improvement and support facilities

ness property on Indian reservation on

for motor sports entertainment facilities

regarding your subtraction.

federal Form 4562 using the alterna-

you must recalculate the depreciation

Continue to check our website for updates.

tive depreciation class-life, recalculate

using a 15 or 39 year life (as appropriate).

depreciation using the regular class-life

Enter the difference between the special

and enter the difference. Individual

7 year depreciation and the recomputed

taxpayer enter this amount on line 7 of

depreciation on the corresponding line.

Schedule M1NC.

Individual taxpayer enter this amount on

line 10 of the Scheduled M1NC.

Allocation of Adjustments

The beneficiary(s) of a trust or an estate must

Where the adjustment is an addition, that

ciary and the fiduciary in column E, under

file an individual income tax return to report

portion of the adjustment allo cated to each

additions or subtractions.

their portion of the income distributed. A resi-

beneficiary and to the fiduciary must be

Complete a Schedule KF for each beneficiary

dent beneficiary must report all income from

shown as an addi tion.

who is assigned adjustments.

the trust or estate. A nonresident beneficiary

Where the adjustment is a subtraction, that

who receives $10,350 or more of Minnesota

Schedule KF

part of the adjustment allocated to each ben-

gross income must report income assignable to

eficiary and to the fiduciary must be shown

Minnesota.

as a subtraction.

The purpose of this section is to allocate any

Column C

Complete and provide Schedule KF to each

adjustments noted on lines 25-33 and 35–41

Enter the federal distributable net income as-

between the beneficiary(s) and fiduciary.

nonresident beneficiary with Minnesota

signed to each beneficiary and the fiduciary

If all the income is retained by the trust

source income and any Minnesota ben-

as deter mined for federal purposes. Add

or estate, then any adjustment is allocated

eficiary who has adjustments to income.

the amounts and enter the total on line 45,

entirely to the fiduciary. If all of the income

Purpose

column C.

is distributed, then any adjustment is passed

through to the beneficiary(s) in proportion

The purpose of Schedule KF is to provide

Column D

to their share of distributable net income.

beneficiaries with the information they

To obtain the proper percentage, divide each

If part of the income is retained and part

need to file Form M1, Minnesota Individual

figure from column C on lines 43 and 44 by

distributed, then part of the adjustment is

Income Tax Return. The schedule shows

the total of column C on line 45. Enter this

allocated to the fiduciary and part to the

each beneficiary their specific share of the

percentage in column D for to correspond

beneficiary(s).

fiduciary’s income, credits and modifica-

with each beneficiary and the fiduciary. The

tions.

The share of adjustments in column E is the

total of column D must equal 100%.

same percentage share as the fiduciary’s and

A beneficiary who is a Minnesota resident

Column E

each beneficiary’s share of federal distribut-

must report all income from the trust or es-

able net income to the total distributable

To obtain the proper share for each benefi-

tate. A nonresident beneficiary must report

net income (the amount on Form 1041,

ciary and the fiduciary, multiply the adjust-

income which is assignable to Minnesota.

Schedule B, line 7.) Divide each share by the

ment on line 45, column E, under addi-

Be sure to include copies of all Schedules

total distributable net income to determine

tions and subtractions by the percentage in

KF and federal Schedules K-1 when you file

the percentage.

column D. Enter the result for each benefi-

your Form M2.

Instructions For Form M2 - Minnesota Income Tax For Estates And Trusts (Fiduciary) - 2016 Page 9

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