Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-3-25 - ESTATES AND TRUSTS › Section 810-3-25-.10 - Computation Of Alabama Taxable Income For An Estate Or Trust For Taxable Years Beginning After December 31, 2004

Current through Register Vol. 42, No. 9, June 28, 2024
(1) For tax years beginning after December
			 31, 2004, the computation of Alabama taxable income for an estate or trust
			 shall be determined in accordance with Subchapter J of Chapter 1 of Subtitle A
			 of the Internal Revenue Code,  26 U.S.C. §§
									641 through  692, relating
			 to estates, trusts, beneficiaries, and decedents, with certain exceptions, as
			 specified below:
(a) The income and
			 deductions of the estates and trusts shall be increased by any items that are
			 includable or deductible by an individual in computing Alabama income tax but
			 are not includable or not deductible by an individual in computing federal
			 income tax. The income and deductions of the estates and trusts shall be
			 decreased by any items that are not includable or not deductible by an
			 individual in computing Alabama income tax but are includable or deductible by
			 an individual in computing federal income tax.
1. The differences referred to in this
			 paragraph are numerous, and can change with the passage of federal or Alabama
			 tax legislation. This regulation does not intend to include a complete list of
			 such differences.
2.
Deduction for Federal Income Taxes Paid
. One example
			 of the differences is the treatment of payments for federal income tax. Federal
			 income tax paid is allowed as a deduction to individuals in accordance with
			 §
										40-18-15,
Code of Ala. 1975
, but is not allowed as a deduction
			 for federal income tax purposes. Refunds of federal income tax paid in a prior
			 tax year is includable as income in computing the Alabama taxable income for an
			 individual taxpayer.
3.
Depletion Deduction
. The depletion deduction allowed
			 individuals in computing Alabama taxable income is specified in §
										40-18-15,
Code of Ala. 1975
, but may differ from the depletion
			 deduction allowed for federal income tax purposes.
4.
Payments for State Income
			 Taxes
. State income taxes paid to a state other than Alabama may
			 be deductible for federal income tax purposes, but is not deductible by an
			 individual in computing Alabama taxable income - see §
										40-18-15,
Code of Ala. 1975
.
5.
Tax Exempt
			 Income
. Tax exempt interest income for Alabama income tax purposes
			 can differ from tax exempt interest income for federal purposes. Interest
			 income from obligations of the United States or its possessions is taxable for
			 federal income tax purposes and is exempt for Alabama income tax purposes - see
			 §
										40-18-14,
Code of Ala. 1975
. Interest income from the
			 obligations of the State of Alabama and the obligations of Alabama local
			 political subdivisions is exempt for federal income tax purposes, and is exempt
			 for Alabama income tax purposes - see §
										40-18-14,
Code of Ala. 1975
. Interest income from non-Alabama
			 state and local government obligations is exempt for federal income tax
			 purposes, but not for Alabama income tax purposes -see §
										40-18-14,
Code of Ala. 1975
.
6.
Federal Passive Activity Loss
			 Restrictions
. Estates and trusts are subject to certain federal
			 passive activity losses restrictions, which are not applicable in computing
			 Alabama taxable income.
7.
Capital Gains and Losses
. While federal income tax law
			 may limit the amount of capital losses that may be claimed by a taxpayer in a
			 tax year, in computing Alabama taxable income estates and trusts shall report
			 gains and losses in accordance with §
										40-18-8,
Code of Ala. 1975
.
8.
Charitable Contribution
			 Deduction
. In computing Alabama taxable income an estate or trust
			 is entitled to the charitable contribution deduction provided for individual
			 taxpayers in §
										40-18-15,
Code of Ala. 1975
, or the unlimited charitable
			 contribution deduction allowed by  26 U.S.C. §
											642(c).
9.
Net Operating Loss
			 Deduction
. In computing Alabama taxable income an estate or trust
			 is only entitled to the net operating loss deduction provided for individual
			 taxpayers in §
										40-18-15.2,
Code of Ala. 1975
, not the federal net operating loss
			 deduction allowed by  26 U.S.C. §
											172. In addition to the NOL deduction
			 allowed by §
										40-18-15.2,
Code of Ala. 1975
, certain trusts are allowed a
			 Special NOL Deduction by Section 4 of Act 2006-114.
10.
Personal
			 Exemption
. The personal exemption amount allowed as a deduction to
			 estates and trusts in computing Alabama taxable income is $1,500 - the same
			 amount allowed a single individual under §
										40-18-19,
Code of Ala. 1975
.
11.
Nonresident Estate and Trust
			 Income and Deductions
. Nonresident estates and trusts must report
			 Alabama source income in accordance with §
										40-18-14,
Code of Ala. 1975
, and are allowed deductions in
			 computing Alabama taxable income in accordance with §
										40-18-15,
Code of Ala. 1975
.
12.
Deductions not Claimed on the
			 Federal Return in Order to Take a Federal Employment Tax Credit
.
			 Certain federal employment tax credits require the wages to be reduced in the
			 amount of the credit taken - the amount the wages were reduced would be allowed
			 as a deduction for Alabama income tax purposes.
13.
Deduction for Foreign Income
			 Taxes Paid
. In some cases a taxpayer may deduct foreign income
			 taxes paid or accrued for federal income tax purposes. An estate or trust is
			 prohibited by §
										40-18-15,
Code of Ala. 1975
, from claiming a deduction for
			 foreign income taxes paid or accrued in computing Alabama taxable
			 income.
14.
Federal
			 Estate Tax
.
1. An estate or
			 trust in computing Alabama taxable income is prohibited by §
											40-18-25(f),
Code of Ala. 1975
, from claiming the deduction
			 otherwise allowable under  26 U.S.C. §
												691(c)(1)(A), the federal deduction
			 for a portion of the estate tax paid when income in respect of a decedent is
			 reported.
2. Federal estate taxes
			 paid are allowed as a deduction to individuals in computing Alabama taxable
			 income - in accordance with §
											40-18-15,
Code of Ala. 1975
.