field_block:node:page:title

Sourcing Income for Gains Related to Installment Sale

field_block:node:page:body

Under Minnesota Statutes, section 290.17, subdivision 2(c), nonresident individuals must source installment gains on intangible personal property not employed in the seller’s business to the seller’s state of residence.

When an individual makes an election under Minnesota Statutes, section 290.0137(b), they irrevocably agree to fixing the source of the gain using the rules (apportion, allocate, or neither) that applied in the tax year when the sale occurred.

Installment Sale Example

Helena is a shareholder in Acme Corporation, an S corporation operating solely in Minnesota. Through an installment sale in tax year 2020, she sold her shares of Acme while she was a Minnesota resident. Helena received her first payment in 2021 while she was a Wisconsin resident.  Helena made an election to defer recognizing unrecognized installment sale gains under paragraph (b) of Minnesota Statutes section 290.0137.

For tax year 2021, Helena must source the installment gains on the sale of the stock to Minnesota because it was her state of residence at the time of the sale. For future tax years, she should file as a nonresident and report 100% of the installment sale gains in both columns of Schedule M1NR, Part-Year Resident/Nonresident.

Helena's Simplified Tax Returns

Tax Return LineYear One
(Year of Sale, Minnesota resident)		Year Two
(Wisconsin resident, but sources gains to Minnesota)
Federal adjusted gross income, plus additions to Minnesota income$1,500,000$400,000
Total itemized deductions, exemptions, subtractions$220,000$160,000
Minnesota taxable income$1,280,000$240,000
Tax from the Form M1 Instructions$118,520$15,955
Schedule M1NR Amount or Form M1 Tax Amount$118,520$15,756
M1NR, Column An/a$400,000
M1NR, Column Bn/a$400,000
Tax after nonrefundable credits$118,000$15,756
Total payments (withholding, payments, refundable credits)$50,000$2,000
Tax liability$68,000$13,756


For details, see Accelerated Recognition of Installment Sale Gains. 

  • Print Page

Contact Info

Email
Phone
Hours
Address
field_block:node:page:field_last_updated
Last Updated