See the example below for how you apply the business allocation when calculating your Minnesota addition and subtraction.
Example
Kelly, a nonresident of Minnesota, is a 60 percent shareholder of Capital T, an S corporation that had 50% of its sales in Minnesota. For tax year 2018, she received federal Schedule K-1 from Capital T showing her share of bonus depreciation in the amount of $75,000. Kelly uses this amount when filing her federal return.
The $75,000 represents 100% of her share of the basis in the qualifying property placed in service in 2018. For Minnesota tax purposes, she may reduce her Minnesota Adjusted Gross Income by $30,000 (40% of $75,000), she will make an adjustment on Schedule M1NC. When she completes her Schedule M1M, Income Additions and Subtractions, she will need to add back $24,000 (80% of $30,000) to her Minnesota taxable income.
To determine her tax liability for 2018, she files the Minnesota return using Schedule M1NR, Nonresidents/Part-Year Residents.
Kelly calculates her bonus depreciation addition and subtraction on Schedule M1NR:
- Line 10, Column A: $24,000 (full addback reported on Schedule M1M)
- Line 10, Column B: $24,000 x .50 (business ratio) = $12,000
- Line 11, Column A: $45,000 (full addback reported on Schedule M1NC)
- Line 11, Column $45,000 x .50 (business ration) = $22,500
Note: The 2018 bonus depreciation addition reported on line 10, column A ($24,000) is the same amount reported on the Federal Bonus Depreciation addition line of Schedule M1M, Income Additions and Subtractions.
