Missouri Code of State Regulations › Title 12 - DEPARTMENT OF REVENUE › Division 10 - Director of Revenue › Chapter 2 - Income Tax › Section 12 CSR 10-2.010 - Capital Loss Allocation Between Spouses, Allocation of Taxable Social Security Benefits Between Spouses, and Computation of an Individual's Missouri Adjusted Gross Income on a Combined Income Tax Return

Current through Register Vol. 49, No. 14, July 15, 2024
PURPOSE: This rule sets forth the method to be used
				  by married persons filing joint federal income tax returns in allocating
				  capital losses between the spouses for Missouri income tax purposes and
				  explains the proper method of determining and reporting the taxable portion of
				  Social Security benefits in cases where both spouses have income and how the
				  combined Missouri adjusted gross income is computed on a combined return for
				  purposes of computing each spouse's separate income tax
				  liability.
PUBLISHER'S NOTE: The secretary of state has
				  determined that the publication of the entire text of the material which is
				  incorporated by reference as a portion of this rule would be unduly cumbersome
				  or expensive. This material as incorporated by reference in this rule shall be
				  maintained by the agency at its headquarters and shall be made available to the
				  public for inspection and copying at no more than the actual cost of
				  reproduction. This note applies only to the reference material. The entire text
				  of the rule is printed here.
(1) The following general rules have been
				issued by the Missouri Department of Revenue and should be used in arriving at
				Missouri adjusted gross income (MAGI) of each spouse in situations involving
				losses from sale or exchange of capital assets, but only if the spouses file a
				joint federal income tax return for the year.
(2) Losses: General Rule. If the losses from
				the sale or exchange of capital assets exceed the net gains from the sales, so
				a loss is reported on federal Form 1040 U.S. Individual Income Tax Return,
				then, subject to the limitation provided for in Internal Revenue Code (IRC)
				Section 1211, allocate the excess to the spouse responsible for the excess.
				(For examples 1-3 below, the Section 1211 limitation is $3,000.) If both
				spouses are responsible for the excess, then allocate the excess, subject to
				IRC Section 1211 limitation, between the spouses on a pro rata basis.
(A) Example No. 1: Assume the following facts
				on the joint federal income tax return for 2017:
Spouse 1
Spouse 2
Total
Wages
$10,000
$5,000
$15,000
Gain (loss)
($2,000)
($3,000)
($5,000)
Section 1211
limitation
($3,000)
Federal adjusted gross income (FAGI)
$12,000
Missouri Answer: The amount of the excess is $5,000 but,
				  because of the limitation of IRC Section 1211, the deductibility of the loss is
				  limited to $3,000. Since both spouses are responsible for the excess, then
				  allocate the $3,000 on a pro rata basis, that is- Spouse 1 (2/5 x 3,000) and
				  Spouse 2 (3/5 x 3,000).
MAGI is therefore-
Spouse 1
Spouse 2
Total
Wages
$10,000
$5,000
Section 1211 deduction
($1,200)
($1,800)
MAGI
$8,800
$3,200
$12,000
(B)
				Example No. 2: Assume the following facts on the joint federal income tax
				return for 2017:
Spouse 1
Spouse 2
Total
Wages
$10,000
$5,000
$15,000
Short-term Gain (loss)
($200)
($300)
($500)
Long-term Gain (loss)
($8,000)
$3,000
($5,000)
Section 1211 limitation
($3,000)
Federal adjusted gross income
$12,000
Missouri Answer: The amount of the excess is $5,500 but,
				  because of the limitation of IRC Section 1211, the deductibility of the loss is
				  limited to $3,000. The $5,500 excess includes $5,200 for Spouse 1 and $300 for
				  Spouse 2. Since both spouses are responsible for the excess, then allocate the
				  $3,000 on a pro rata basis, that is, Spouse 1 (5,200/5,500 x 3,000) and Spouse
				  2 (300/5,500 x 3,000).
MAGI is therefore:
Spouse 1
Spouse 2
Total
Wages
$10,000
$5,000
Section 1211 deduction
($2,850)
($150)
MAGI
$7,150
$4,850
$12,000
(C)
				Example No. 3: Assume the following facts on the joint federal income tax
				return for 2017:
Spouse 1
Spouse 2
Total
Wages
$10,000
$5,000
$15,000
Short-term Gain (loss)
$1,000
($1,000)
$0
Long-term Gain (loss)
($8,000)
$3,000
($5,000)
Section 1211
limitation
($3,000)
FAGI
$12,000
Missouri Answer: Since there are no net short-term losses,
				  all of the IRC Section 1211 limitation of $3,000 should be allocated from
				  excess long-term losses. Since Spouse 1 is responsible for the excess, the
				  entire amount of the limitation is allocated to Spouse 1.
MAGI is therefore:
Spouse 1
Spouse 2
Total
Wages
$10,000
$5,000
Section 1211
deduction
($3,000)
$0
MAGI
$7,000
$5,000
$12,000