reglab/statecodes huggingface dataset:
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 1.26-51-424(a)(1) - Losses

Current through Register Vol. 49, No. 6, June, 2024
Losses sustained during the tax year, and not compensated
					 for by insurance or otherwise are fully deductible if:
1) Incurred in a trade or business;
2) Incurred in any transaction entered into
				  for profit;
3) Losses of property
				  not connected with a trade or business if these losses arise from fires,
				  storms, shipwrecks, other casualty, or theft, only to the extent that the
				  amount of the loss from each casualty or theft shall exceed one hundred dollars
				  ($100.00) and if the aggregate amount of all such losses sustained by an
				  individual during any one (1) income year exceeds ten percent (10%) of the net
				  income of the individual for that income year.
There shall be allowed any loss attributable to a disaster
					 occurring in an area subsequently determined by the President of the United
					 States to warrant assistance by the Federal government under the Disaster
					 Relief Act of 1974. A taxpayer may elect to deduct this loss, less one hundred
					 dollars ($100.00), for the year immediately preceding the tax year of the
					 disaster. For example, if a taxpayer experiences a loss in 1993 and elects to
					 carry the loss back to 1992, the loss is deductible only to the extent that it
					 exceeds ten percent (10%) of the adjusted gross income for
					 1992.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 2.26-51-424(a)(1) - Transfer of Property to Related Person

Current through Register Vol. 49, No. 6, June, 2024
No loss is realized by the transfer of property by gift,
					 by death or by sale to any person related by blood or marriage at less than the
					 fair market value.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 3.26-51-424(a)(1) - Voluntary Removal or Demolition

Current through Register Vol. 49, No. 6, June, 2024
Losses due to the voluntary removal or demolition of old
					 buildings, scrapping of old machinery, equipment, etc., incident to renewals
					 and replacements, are deductible from gross income. When a taxpayer buys real
					 estate upon which is located a building which he proceeds to raze with the
					 intent of erecting thereon another building, it will be considered that the
					 taxpayer has sustained no deductible loss by reason of the demolition of the
					 old building and no deductible expense on account of the cost of such removal,
					 the value of the real estate, exclusive of old improvements, which is presumed
					 equal to the purchase price of the land and building plus the cost of removing
					 the useless building.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 4.26-51-424(a)(1) - Obsolescence

Current through Register Vol. 49, No. 6, June, 2024
When, through some change in business conditions, the
					 usefulness in the business of some or all of the capital assets is suddenly
					 terminated so that the taxpayer discontinues the building or discards such
					 assets permanently from use in such business, he may claim as a loss for the
					 year in which he takes such action the difference between the cost of the
					 assets less depreciation, etc., and the salvage value thereof. This exception
					 does not extend to a case where the useful life of property terminates solely
					 as a result of those gradual processes for which depreciation allowances are
					 authorized, nor does it apply to inventories or to other than capital assets.
					 The exception applies to buildings only when they are permanently abandoned and
					 to machinery only when its use as such is permanently abandoned. Any loss to be
					 deductible under this exception must be fully explained in the return of
					 income.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 5.26-51-424(a)(1) - Shrinkage in Value of Stock

Current through Register Vol. 49, No. 6, June, 2024
A person possessing stock of a corporation cannot deduct
					 from gross income any amount claimed as a loss merely on account of shrinkage
					 in the value of such stock through fluctuation of the market or otherwise. The
					 loss allowable in such cases is that actually suffered when the stock is
					 disposed of. If such stock of a corporation becomes worthless, its cost or
					 other basis may be deducted by the owner in the tax year in which the stock
					 became worthless.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 6.26-51-424(a)(1) - Farm Losses

Current through Register Vol. 49, No. 6, June, 2024
Losses incurred in the operation of farms as business
					 enterprises are deductible from gross income. If farm products are held for
					 favorable markets, no deductions for shrinkage in weight or physical value or
					 by reason of deterioration in storage, shall be allowed except as such
					 shrinkage may be reflected in an inventory, if used to determine profits. The
					 total loss by frosts, storm, flood or fire of a prospective crop is not
					 deductible loss in computing net income. A farmer engaged in raising or selling
					 stock, cattle, sheep, horses, etc., is not entitled to claim as a loss the
					 value of animals that perish from among these animals that were raised on the
					 farm, except as such loss is reflected if an inventory is used. The cost of any
					 feed, pasture, or care which has been deducted as an expense of operation shall
					 not be included as part of the cost of the stock for the purpose of
					 ascertaining the amount of deductible loss. If gross income is ascertained by
					 inventories, no deduction can be made for livestock or products lost during the
					 tax year, whether purchased for resale or produced on the farm, as such losses
					 will be reflected in the inventory by reducing the amount of livestock or
					 products on hand at the close of the tax year. If any individual owns and
					 operates a farm, in addition to being engaged in another trade, business, or
					 calling, and sustains a loss from such operation of the farm, then the amount
					 of loss sustained may be deducted from gross income received from all sources,
					 provided the farm is not operated for recreation or pleasure.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-425 - DEDUCTIONS - WORTHLESS DEBTS › Rule 1.26-51-425 - Worthless Debts

Current through Register Vol. 49, No. 6, June, 2024
Worthless debts shall be allowed as deductions from income
					 after being ascertained as such. There are two types of bad debts an individual
					 may incur, business and non-business. A business bad debt is created and
					 deductible from the taxpayers ordinary net income computation. A nonbusiness
					 bad debt is listed on a Federal schedule "D" with documents and deducted as a
					 short term capital loss. There shall accompany the return a statement showing
					 the propriety of any deduction claimed for bad debts. Before a taxpayer may
					 charge off and deduct a debt in part, he must ascertain and be able to
					 demonstrate with a reasonable degree of certainty the amount thereof which is
					 uncollectible. An amount subsequently received on account of a bad debt, or on
					 account of a part of such debt previously charged off and allowed as a
					 deduction for income tax purposes must be included in gross income in the tax
					 year in which received.
Bankruptcy is generally an indication of the worthlessness
					 of at least a part of an unsecured and unpreferred debt. Actual determination
					 of worthlessness in bankruptcy cases is sometimes possible before and, at other
					 times, only when settlement in bankruptcy shall have been made. Where a
					 taxpayer ascertained a debt to be worthless and charged it off in one tax year,
					 the mere fact that bankruptcy proceedings instituted against the debtor are
					 terminated in a later tax year, confirming the conclusion that the debt is
					 worthless, will not authorize shifting the deduction to such later tax year. If
					 a taxpayer computes his income upon the basis of valuing his notes or accounts
					 receivable at their fair market value when received, which may be less than
					 their face value, the amount deductible for bad debts in any case is limited to
					 such original valuation.
Worthless debts arising from unpaid wages, salaries, rents
					 and similar items of taxable income, will not be allowed as a deduction unless
					 such items have been entered as income in the books of the taxpayer in a prior
					 tax year or in the tax year in which the deduction was made. Only the
					 difference between the amount received in distribution of the assets of a
					 bankruptcy and the amount of the claim may be deducted as a bad debt. The
					 difference between the amount received by a creditor of a decedent in
					 distribution of the assets of the decedent's estate and the amount of his claim
					 may be considered a worthless debt. A purchaser of accounts receivable which
					 cannot be collected and are subsequently charged off the books as bad debts is
					 entitled to deduct them, the amount of the deductions to be based upon the
					 price he paid for them and not upon their face value.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-425 - DEDUCTIONS - WORTHLESS DEBTS › Rule 2.26-51-425 - Mortgaged or Pledged Property Sold for Less Than the Amount of the Debt

Current through Register Vol. 49, No. 6, June, 2024
Where mortgaged or pledged property is lawfully sold
					 (whether to the creditor or another purchaser) for less than the amount of the
					 debt, and the mortgagee or pledgee ascertains that the portion of the
					 indebtedness remaining unsatisfied after such sale is wholly or partially
					 uncollectible and charges it off, he may deduct such amount (to the extent that
					 it constitutes capital or represents an item the income from which has been
					 reported by him) as a bad debt for the tax year in which it is ascertained to
					 be wholly or partially worthless and charged off. In addition, where the
					 creditor buys in the mortgaged or pledged property, loss or gain is realized,
					 measured by the difference between the amount of those obligations of the
					 debtor which are applied to the purchase or bid price of the property (to the
					 extent that such obligations constitute capital or represent an item the income
					 from which has been returned by him) and the fair market value of the property.
					 The fair market value of the property shall be presumed to be the amount for
					 which it is bid in by the taxpayer, in the absence of clear and convincing
					 proof to the contrary. If the creditor subsequently sells the property so
					 acquired, the basis for determining gain or loss is the fair market value of
					 the property at the date of acquisition.
Accrued interest may be included as part of the deduction
					 only when it has previously been reported as income.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-425 - DEDUCTIONS - WORTHLESS DEBTS › Rule 3.26-51-425 - Bonds or Other Similar Obligations

Current through Register Vol. 49, No. 6, June, 2024
Bonds, when ascertained to be worthless, may be treated as
					 bad debts to the amount actually paid for them. Bonds of an insolvent
					 corporation secured only by a mortgage from which, on foreclosure, nothing is
					 realized for the bondholders, are regarded as ascertained to be worthless not
					 later than the tax year of the foreclosure sale and no deduction for a bad debt
					 is allowable in computing a bondholder's income for a subsequent tax
					 year.
A taxpayer (other than a dealer in securities) possessing
					 debts evidenced by bonds or other similar obligations, cannot deduct from gross
					 income any amount merely on account of market fluctuations, when a taxpayer
					 ascertains, however, that due to the financial condition of the debtor or
					 conditions other than market fluctuations, he will recover upon maturity none
					 or only a part of the debt evidenced by the bonds or other similar obligations
					 and so demonstrates to the satisfaction of the Director, he may deduct, in
					 computing net income, the uncollectible part of the debt evidenced by the bonds
					 or other similar obligations.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-427 - DEDUCTIONS - NET OPERATING LOSS CARRYOVER › Rule 2.26-51-427 - Net Operating Loss Carryover - Adjustments

Current through Register Vol. 49, No. 6, June, 2024
The fact that the statutory period for assessment of
					 income taxes for the year in which the loss was sustained has expired does not
					 preclude the making of such adjustments as may be necessary to correct the net
					 operating loss deduction. The net operating loss may be increased or decreased
					 by any such adjustment.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-428 - DEDUCTIONS - DEPRECIATION; EXPENSING OF PROPERTY › Rule 1.26-51-428(a) - Depreciation

Current through Register Vol. 49, No. 6, June, 2024
For property placed in service during tax years beginning
					 before 01/01/95, IRC Sections 167, 168 and 179 as in effect on 01/01/91 shall
					 apply. The IRC Sec. 179 deduction is limited to $10,000. Any IRC Sec. 179
					 expense disallowed because of the limitation may be depreciated by regular
					 depreciation methods appropriate for that property or can be carried
					 forward.
Property placed in service during tax years beginning
					 before 01/01/95 will have a useful life as determined by IRC Sec. 168 as in
					 effect on 01/01/91. Property placed in service during tax years beginning on or
					 after 01/01/95 will have a useful life as determined by IRC Sec. 168 as in
					 effect on 01/01/95.
Any differences in basis because of depreciation
					 differences must be included in the determination of gain or loss upon
					 disposition of the property.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-428 - DEDUCTIONS - DEPRECIATION; EXPENSING OF PROPERTY › Rule 1.26-51-428(c) - Amortization of Intangibles

Current through Register Vol. 49, No. 6, June, 2024
For tax years beginning before 01/01/95, IRC Sec. 197
					 regarding amortization of intangibles shall apply. For tax years beginning on
					 or after 01/01/95, IRC Sec. 197 shall apply.
Any differences in Arkansas and Federal basis must be
					 considered in calculating gain or loss upon disposition of the
					 intangibles.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-435 - NONRESIDENTS OR PART-YEAR RESIDENTS › Rule 1.26-51-435(a)&(b) - Computing Taxable Income

Current through Register Vol. 49, No. 6, June, 2024
Nonresidents or part-year residents of Arkansas shall
					 compute their taxable income as if all their income was earned in Arkansas,
					 despite the fact that a portion of their income may have been earned in another
					 state or foreign country. Nonresident or part-year residents of Arkansas shall
					 use Arkansas income tax rates to compute their Arkansas tax liability on their
					 taxable income. The computed tax liability is then prorated to Arkansas based
					 on a percentage calculated according to 1.
					 26-51-435(d).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-435 - NONRESIDENTS OR PART-YEAR RESIDENTS › Rule 1.26-51-435(c) - Credit for Income Tax Paid to Another State

Current through Register Vol. 49, No. 6, June, 2024
After a nonresident or part-year resident's Arkansas tax
					 liability has been computed as set forth in 1.
					 26-51-435(a)
					 & (b), all allowable tax credits should be deducted to determine the amount
					 of income tax due the State of Arkansas. However, credit may not be taken for
					 individual income taxes paid to another state (or states) during the tax year
					 at issue unless the taxpayer is a resident of Arkansas
and
can
					 clearly prove that he or she would be subject to "double taxation" if the
					 other-state-tax-credit was not allowed.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-435 - NONRESIDENTS OR PART-YEAR RESIDENTS › Rule 1.26-51-435(d) - Computing Percentage of AGI Attributable to Arkansas

Current through Register Vol. 49, No. 6, June, 2024
The percentage (%) that Arkansas adjusted gross income
					 (AGI) represents of
all
AGI received by a nonresident or part-year
					 resident during the tax year shall be computed as follows:
Click here to
					 view image
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Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-435 - NONRESIDENTS OR PART-YEAR RESIDENTS › Rule 1.26-51-435(e) - Calculating Arkansas Income Tax Due

Current through Register Vol. 49, No. 6, June, 2024
In order to determine the proper amount of income tax that
					 must be paid to the State of Arkansas by a nonresident or part-year resident,
					 the tax shall be computed as follows:
Click here to
					 view image
.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-435 - NONRESIDENTS OR PART-YEAR RESIDENTS › Rule 1.26-51-436(2) - Deductions - Passive Activity Loss

Current through Register Vol. 49, No. 6, June, 2024
If all gain or loss realized on the disposition of an
					 entire interest in a passive activity is recognized, then
the excess
					 of
:
Any loss from the activity for the tax year of disposition
					 (including losses carried over from earlier years)
OVER
Any net income or gain for the tax year from all other
					 passive activities (including losses carried over from earlier years)
is treated as a loss that is not from a passive activity.
					 IRC Sec. 469(g)(1)(A). As such, any gain from disposing of a passive activity
					 would offset any loss from the activity for the tax year of the disposition.
					 The balance of the loss would then be applied first against any net income or
					 gain from other passive activities, and finally against nonpassive
					 income.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-435 - NONRESIDENTS OR PART-YEAR RESIDENTS › Rule 2.26-51-436(2) - Passive Activity Credits - Oil and Gas Properties

Current through Register Vol. 49, No. 6, June, 2024
Passive activity credits can only be used to offset taxes
					 allocable to income from passive activities. A working interest in oil or gas
					 property which the taxpayer holds either directly or through an entity that
					 does not limit his liability is not a passive activity. However, if the
					 taxpayer has any loss for any tax year from such an interest, then any net
					 income from the property for any later tax year is treated as income that is
					 not from a passive activity, notwithstanding that the activity may otherwise
					 have become passive with respect to the taxpayer. IRC Sec. 469(c)(3)(B).
The 1996 Act provides that if, under the above rule, the
					 net income from a working interest in an oil or gas property is treated as
					 income that is not from a passive activity for any tax year, then any credits
					 attributable to the property for that year are not treated as credits from a
					 passive activity. The credits are treated as not from a passive activity even
					 for a tax year in which the activity is no longer treated as not being a
					 passive activity (i.e., the activity has become passive with respect to the
					 taxpayer).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-436 - MEDICAL SAVINGS ACCOUNTS › Rule 1.26-51-436(5) - Medical Savings Account (MSA) - Defined

Current through Register Vol. 49, No. 6, June, 2024
An MSA is a trust or custodial account that is created or
					 organized in the United States exclusively for the purpose of paying the
					 qualified medical expenses of an "account holder" (i.e., taxpayer) as well as
					 the taxpayer's spouse and/or dependents. IRC Sec. 220(d)(1). The IRS has a MSA
					 pilot program for employees of small businesses and self-employed persons. The
					 accounts must be used in conjunction with "high deductible" health insurance.
					 Participation is limited to the first 750,000 taxpayers utilizing MSAs each
					 year for the tax years 1997 through 2000.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-436 - MEDICAL SAVINGS ACCOUNTS › Rule 2.26-51-436(5) - Medical Savings Account (MSA) - Eligibility

Current through Register Vol. 49, No. 6, June, 2024
In order to be eligible, a taxpayer must have insurance
					 coverage only under a "high deductible" health plan. An "eligible individual"
					 is more specifically defined at IRC Sec. 220(c)(1)(A). "High deductible health
					 plan" is defined at IRC Sec. 220(c)(2)(A).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-436 - MEDICAL SAVINGS ACCOUNTS › Rule 3.26-51-436(5) - Medical Savings Account (MSA) - Deductibility from Income

Current through Register Vol. 49, No. 6, June, 2024
The amount of MSA contributions made by a taxpayer should
					 be broken down on a month-by-month basis. For any given month, the limitation
					 on the deduction that can be taken for that particular month is set forth at
					 IRC Sec. 220(b)(1)&(2). Other key points regarding deductibility of
					 contributions include:
* The annual contribution limit is the sum of the limits
					 determined separately for each month, based on the individual's status and
					 health plan coverage as of the first day of the month;
* The deduction for MSA contributions cannot exceed the
					 taxpayer's compensation. For employees, see IRC Sec. 220(b)(4)(A). For
					 self-employed individuals, see IRC Sec. 220(b)(4)(B).
* No deduction is allowed to an individual if any other
					 person is entitled to a personal exemption on account of the individual,
					 whether or not the personal exemption is actually taken;
* Contributions to an MSA for a tax year can be made until
					 the due date for filing the individual's tax return for the year (determined
					 without regard to extensions). For example, with respect to Arkansas individual
					 income tax returns, the deadline for contributions that a taxpayer wishes to
					 deduct on his 1997 return would be May 15, 1998;
* MSA contributions are taken into account in arriving at
					 AGI (i.e., they are taken above-the-line). As such, MSA contributions can be
					 deducted even if the taxpayer does not itemize deductions.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-436 - MEDICAL SAVINGS ACCOUNTS › Rule 4.26-51-436(5) - Medical Savings Account (MSA) - Exclusion from Income

Current through Register Vol. 49, No. 6, June, 2024
Employer contributions to an MSA on behalf of an eligible
					 individual are excludable from gross income. The amount excludable from gross
					 income cannot exceed the MSA
deduction
limit applicable to the
					 individual. See Regulation 3.
					 26-51-436(5);
					 IRC Sec. 106(a)&(b).
However, employer contributions to an MSA are
					 not excludable from gross income if made at the election of the employee under
					 a salary reduction arrangement under a cafeteria plan
. Other key points
					 regarding excludability of contributions include:
* Any employer contribution to an MSA (if otherwise
					 allowable as a deduction) is allowed only for the tax year in which it is
					 actually made;
* Every individual required to file an income tax return
					 for the tax year must include on the return the aggregate amount contributed by
					 employers to the MSAs of the individual or the individual's spouse for the tax
					 year.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-436 - MEDICAL SAVINGS ACCOUNTS › Rule 1.26-51-436(6) - Medical Savings Account (MSA) - Taxability of Account Earnings

Current through Register Vol. 49, No. 6, June, 2024
MSA earnings are exempt from income taxation. However, if
					 an MSA ceases to be an MSA, the account's subsequent earnings would be subject
					 to taxation. IRC Sec. 220(e).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-436 - MEDICAL SAVINGS ACCOUNTS › Rule 1.26-51-436(7) - Medical Savings Account (MSA) - Taxability of Account Distributions

Current through Register Vol. 49, No. 6, June, 2024
Distributions from an MSA that are used to pay the
					 *qualified medical expenses of an individual or the individual's spouse or
					 dependents are excludable from gross income. IRC Sec. 220(f)(1).
*"qualified medical expenses" are any expenses for medical
					 care as defined under the rules relating to the itemized deduction for medical
					 expenses. See IRC Sec. 220(d)(2)(A).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-436 - MEDICAL SAVINGS ACCOUNTS › Rule 1.26-51-440 - Subchapter M

Current through Register Vol. 49, No. 6, June, 2024
Subchapter M (§851 et seq.) of the Internal Revenue Code
					 of 1986, as in effect on January 1, 1997 has been adopted for the purpose of
					 computing Arkansas income tax liability with respect to regulated investment
					 companies (RICs), real estate investment trusts (REITs) and financial asset
					 securitization investment trusts (FASITs).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 2.26-51-440 - Subchapter M - FASITs - Definition

Current through Register Vol. 49, No. 6, June, 2024
A new type of statutory entity called a financial asset
					 securitization investment trust (FASIT) has been created to facilitate the
					 securitization of debt obligations such as credit card receivables, home equity
					 loans, and auto loans. An entity that qualifies as a FASIT can issue
					 instruments that are treated as debt for Federal income tax purposes (and
					 interest on which is therefore deductible) whether or not they would be so
					 treated under normal tax principles. In addition, a FASIT itself generally
					 isn't taxable, and any taxable income or net loss which it has (after taking
					 into account deductions for interest on the debt) flows through to the equity
					 owner of the FASIT.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 3.26-51-440 - Subchapter M - FASITs - Qualification Requirements

Current through Register Vol. 49, No. 6, June, 2024
To qualify for status as a FASIT, an entity must meet
					 several requirements, which are specifically set forth at IRC Sec. 860L(a)(1).
					 Any entity, including a corporation, partnership or trust may be treated as a
					 FASIT.
The ownership of a FASIT (i.e., the "ownership interest"),
					 must be held directly by an "eligible corporation." IRC Sec. 860L(a)(1)(C). An
					 eligible corporation is a nonexempt domestic C corporation which does not
					 qualify as a RIC, REIT, REMIC or cooperative. Moreover, the ownership interest
					 of a FASIT must generally be entirely held by a single domestic C corporation.
					 IRC Sec. 860L(a)(2).
The FASIT issues debt instruments, called "regular
					 interests," which are in the nature of bonds. These regular interests would
					 normally be purchased by investors and feature the following
					 characteristics:
a. The investor is
				  unconditionally entitled to receive a specified amount of principal;
b. Interest is paid on the
				  principal;
c. A stated term to
				  maturity of usually no more that 30 years;
d. In some cases, a FASIT may issue a
				  high-yield interest rather than a regular interest. The tax treatment to
				  investors of a high-yield interest is different from a regular interest. IRC
				  Sec. 860L(b)(1)(B).
For an entity to qualify as a FASIT, substantially all of
					 its assets must consist of "permitted assets" as defined at IRC Sec.
					 860L(c)(1). The assets of a FASIT are considered to be owned directly by the
					 holder of the ownership interest.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 4.26-51-440 - Subchapter M - FASITs - Taxation of FASITs

Current through Register Vol. 49, No. 6, June, 2024
A FASIT is not subject to income tax, and is not treated
					 as a trust, partnership or corporation. Instead, all of the FASIT's assets and
					 liabilities are treated as the assets and liabilities of the FASIT's owner. Any
					 income, gain, deduction, credit or loss of the FASIT is allocable directly to
					 its owner.
Any FASIT income subject to Arkansas income tax shall be
					 taxed at the corporate rates set forth in ACA
					 26-51-205.
					 No special Arkansas income tax return has been created specifically for FASITs
					 which are located within Arkansas. As noted above, FASIT income passes through
					 to the FASIT's owner. The FASIT's owner is responsible for reporting any such
					 income on the owner's return and paying any Arkansas individual income tax due.
					 Once an election to be a FASIT is made, the election applies for that tax year
					 and all subsequent years until such time that the election is revoked with the
					 consent of the IRS.
All members of an affiliated group filing a consolidated
					 return are to be treated as one taxpayer. IRC Sec. 860J(d). Specifically, the
					 provision that the taxable income of a holder of a FASIT ownership interest
					 cannot be less than the taxable income with respect to the FASIT interest
					 applies to any consolidated group of corporations of which the holder is a
					 member as if the group were a single taxpayer.
The holder of a FASIT ownership interest cannot offset
					 income or gain from the FASIT ownership interest with nonFASIT losses. IRC Sec.
					 860J.
The taxable income of a FASIT (in determining the taxable
					 income of the holder of an ownership interest) should be calculated using an
					 accrual method of accounting. IRC Sec. 860H(b)(2).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 5.26-51-440 - Subchapter M - FASITs - Taxation of Regular Interests

Current through Register Vol. 49, No. 6, June, 2024
The holder of a regular or high-yield interest in a FASIT
					 (normally an investor), is generally taxed in the same manner as a holder of
					 any other debt instrument. IRC Sec. 860H(c)(1).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 6.26-51-440 - Subchapter M - FASITs - Prohibited Transactions

Current through Register Vol. 49, No. 6, June, 2024
In order to ensure that FASITs are not used for purposes
					 other than securitization, a 100% federal excise tax is imposed on any income
					 not related to securitization (that is, income derived from prohibited
					 transactions). Prohibited transactions are specifically set forth at IRC Sec.
					 860L(e)(1)&(2).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 7.26-51-440 - Subchapter M - FASITs - Transfers of Assets to FASITs

Current through Register Vol. 49, No. 6, June, 2024
Where the holder of the ownership interest in a financial
					 asset securitization investment trust (FASIT) or a related person sells or
					 contributes property to the FASIT, gain is recognized immediately in an amount
					 equal to the excess (if any) of the property's value on the date of the
					 contribution over its adjusted basis on that date. This gain is recognized
					 notwithstanding any other income tax Code provision, and the basis of any
					 property is increased by the amount of gain recognized. IRC Sec. 860I.
Losses on assets contributed to the FASIT are not allowed
					 upon their contribution, but may be allowed to the FASIT owner upon their
					 disposition by the FASIT.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 1.26-51-447 - Deduction - College and Technical School Tuition

Current through Register Vol. 49, No. 6, June, 2024
An itemized deduction from the taxpayer's AGI shall be
					 allowed for a portion of the tuition paid by the taxpayer for the taxpayer, the
					 taxpayer's spouse or dependent(s) to attend post-secondary educational
					 institutions which fall into the following classifications:
a. Four-year colleges and
				  universities;
b. Two-year community
				  colleges;
c. Technical institutes
				  and colleges.
The deduction shall be limited to the lesser of:
a. 50% of the amount actually paid for
				  tuition; or
b. 50% of a "weighted
				  average tuition" for post-secondary educational institutions within the
same
classification. On or before November 30th of each year
				  (beginning with November 30th, 1998), the Office of Income Tax Administration
				  shall obtain and make available the weighted average tuition for each of the
				  three classifications.
This deduction includes tuition paid to qualifying
					 post-secondary educational institutions located both inside and outside of
					 Arkansas.
The deduction will be allowable for tax years beginning on
					 or after January 1, 1998.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-502 - HOUSEHOLD AND DEPENDENT CARE SERVICES › Rule 1.26-51-502(a)&(b)(1) - General Requirements for the Credit

Current through Register Vol. 49, No. 6, June, 2024
A credit against individual income tax owed to the State
					 of Arkansas is allowed for expenses associated with household and dependent
					 care services
that are necessary for the taxpayer to obtain or hold
					 gainful employment
. Section 21 of the Internal Revenue Code of 1986, as
					 amended and in effect on January 1, 1997, has been adopted for purposes of
					 calculating this credit. The corresponding Treasury Regulation, as of January
					 1, 1993 remains IRC Reg. 1.44A-1.
As set forth in IRC Reg. 1.44A-1 (1993), five (5) general
					 requirements must be satisfied before the credit can be taken:
1. The taxpayer must maintain a household.
				  IRC Reg. 1.44A-1(a)(2) and (d);
2.
				  One or more "qualifying individuals" must be a member of the taxpayer's
				  household. IRC Reg. 1.44A-1(a)(2) and (b);
3. The household and dependant care expenses
				  must be necessary for the taxpayer to obtain or hold gainful employment. IRC
				  Reg. 1.44A-1(a)(2) and (c);
4. The
				  services provided, whether they are provided inside the household or outside
				  the household (including services provided by dependent care centers), must
				  meet the specific requirements of IRC Sec. 21. IRC Reg. 1.44A-1(c)(2), (c)(3),
				  (c)(4) and (c)(5).
5. The household
				  and dependent care expenses must actually be paid during the tax year for which
				  the credit is being claimed. IRC Reg. 1.44A-1(a)(3).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-502 - HOUSEHOLD AND DEPENDENT CARE SERVICES › Rule 1.26-51-502(b)(2) - Ten Percent (10%) Standard Credit

Current through Register Vol. 49, No. 6, June, 2024
The amount of the credit shall be ten percent (10%) of the
					 total federal credit allowable under IRC Sec. 21 as in effect on January 1,
					 1997.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-502 - HOUSEHOLD AND DEPENDENT CARE SERVICES › Rule 1.26-51-502(c)(1) - Twenty Percent (20%) Approved Child Care Facility Credit

Current through Register Vol. 49, No. 6, June, 2024
A credit against individual income tax owed to the State of
					 Arkansas is allowed for expenses incurred by a "qualified individual" for child
					 care services provided by an "approved child care facility." The amount of this
					 credit shall be twenty percent (20%) of the total federal household and
					 dependent care credit allowed under Section 21 of the Internal Revenue Code as
					 in effect on January 1, 1993. Three (3) general requirements must be satisfied
					 before the credit can be taken:
1. A
				  federal household and dependent care credit must be allowable under IRC Sec. 21
				  as in effect on January 1, 1993.
2.
				  A "qualified individual" is a taxpayer who:
i.
				  Has a dependent child with respect to whom the taxpayer is entitled to a credit
				  under ACA
				  26-51-501(a)(3);
and
ii. Incurs child
				  care expenses necessary to obtain or hold gainful employment at an approved
				  child care facility;
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-502 - HOUSEHOLD AND DEPENDENT CARE SERVICES › Rule 2.26-51-502(c)(1) - Refundability

Current through Register Vol. 49, No. 6, June, 2024
The twenty percent (20%) Arkansas "approved child care
					 facility" credit is refundable. The excess of this credit over the taxpayer's
					 Arkansas tax liability will be returned to the taxpayer as an overpayment of
					 tax.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-502 - HOUSEHOLD AND DEPENDENT CARE SERVICES › Rule 1.26-51-502(c)(2) - Election of Credits

Current through Register Vol. 49, No. 6, June, 2024
A taxpayer cannot claim both the 10 percent and the 20
					 percent child care credit on the same expenses. If an individual has a federal
					 child care credit that includes expenses from a facility that qualifies for the
					 20 percent credit and expenses from a facility that only qualifies for the 10
					 percent credit, the credit must be prorated based on the number of days the
					 child attended each facility.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-502 - HOUSEHOLD AND DEPENDENT CARE SERVICES › Rule 1.26-51-503 - Tax Credit - Mentally Retarded Child

Current through Register Vol. 49, No. 6, June, 2024
A taxpayer who is maintaining, supporting and caring for a
					 mentally retarded child shall be entitled to a $500.00 credit per tax year for
					 the child. If the taxpayer is caring for more than one mentally retarded child,
					 the taxpayer shall be entitled to one $500.00 credit per child.
REQUIREMENTS
The following criteria must be satisfied in order to
					 properly claim the exemption:
1. A
				  physician (medical doctor) must certify in writing that the child is mentally
				  retarded. Such certification shall be valid for state income tax purposes for
				  five (5) years.
2. The individual
				  must meet the eligibility requirements for admission to a Human Development
				  Center, (ACA
				  20-48-404
				  ) which are:
a The taxpayer has resided in the
				  state of Arkansas for at least three (3) years prior to the claim for
				  credit;
b The child is so mentally
				  deficient that he is incapable of managing himself or his affairs, and his
				  welfare requires the special care, training, and education provided at a
				  center; and
c The child's physician
				  has used standard tests and examinations in determining that the child is
				  mentally deficient and in need of the special training provided at a Human
				  Development Center.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-504 - INCOME FROM SOURCES OUTSIDE ARKANSAS › Rule 1.26-51-504(a) - Calculating the Credit

Current through Register Vol. 49, No. 6, June, 2024
When the gross income of an Arkansas resident includes
					 income derived from sources outside the State of Arkansas, such as property or
					 business activity, the Arkansas income tax liability shall first be computed as
					 if
all
of the Arkansas resident's income was derived from sources
					 within the State of Arkansas. However, a credit shall be allowed against the
					 resident's Arkansas income tax liability in the amount of any income tax
actually owed
by the resident for the tax year at issue to any
					 other state or territory.
Any credit given shall not be allowed to exceed what the
					 tax would be on
all
the Arkansas resident's income, from wherever
					 derived, if such tax was calculated using Arkansas income tax rates. No credit
					 shall be allowed against the resident's Arkansas income tax liability unless
					 the resident can clearly show that he or she would be subject to double
					 taxation on a portion of his or her income unless the credit is allowed.
Example:
Mr. and Mrs. Jones file a full year
					 resident return in the state of Arkansas. Mr. Jones works in Arkansas and earns
					 $30,000. Mrs. Jones works in Oklahoma and also earns $30,000. Mrs. Jones paid
					 $1,500 tax to Oklahoma. The Jones' file as status "4" married filing separate
					 on same return.
Click here to
					 view image
.
* The other state tax credit is limited to what the amount
					 of Arkansas tax would be if the Oklahoma income was earned in Arkansas
The Jones'
must
attach a copy of their
					 Oklahoma tax return to their Arkansas tax return in order to receive this
					 credit.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-504 - INCOME FROM SOURCES OUTSIDE ARKANSAS › Rule 1.26-51-504(b) - Prerequisites to Claiming the Credit

Current through Register Vol. 49, No. 6, June, 2024
Before a resident of Arkansas may properly claim a credit
					 for income tax paid to another state or territory, he or she shall include with
					 their Arkansas income tax return the following information:
1. The amount of income tax owed to any other
				  state or territory; and
2. If so
				  requested by the Department's Individual Income Tax Section, information which
				  shows in detail the amount of gross and net income derived by the Arkansas
				  resident from sources outside the State of Arkansas.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-504 - INCOME FROM SOURCES OUTSIDE ARKANSAS › Rule 1.26-51-504(c) - Restriction of Credit

Current through Register Vol. 49, No. 6, June, 2024
The credit against Arkansas individual income tax liability
					 for income taxes actually owed to another state or territory
shall only
					 be available to Arkansas residents or part-year residents
. Nonresidents
					 are not eligible for this credit.
The credit shall also be available to fiduciaries and
					 partnerships residing or domiciled in Arkansas which either:
1. Are subject to Arkansas income tax;
or
2.
				  Have to report income for purposes of Arkansas income tax.