Following the two audits, Appellants paid the IRS everything owed for the years 1990 through 1996. The Commissioner based these changes on the federal adjustments. Appellants filed an administrative appeal with the Commissioner regarding the additional tax owed Minnesota. The Commissioner disallowed the administrative appeal and from the Notice of Determination on Appeal, Appellants filed this appeal with the Court. Under Minnesota law, all net income of a resident individual is subject to tax.
Net income is defined as federal taxable income.
It is well settled under Minnesota law that the federal adjusted gross income figure agreed upon between the taxpayer and the IRS after audit is conclusive on the taxpayer. Wahlberg v. The Commissioner of Taxation , Dkt. The Commissioner calculated Appellants' state taxes based on the federal taxable income agreed upon between Appellants and the IRS as a result of the audit proceedings. Appellants are perplexed and do not understand the imposition of additional state taxes. Clarity is found by examining the difference in tax credits allowed at the federal and state levels.