Tax On Trusts -- Electing Small Business Trusts (Rule 078)

Section 63-3024, Idaho Code 01. In General. The special rules for taxation of electing small business trusts as provided in Section 641, Internal Revenue Code, will apply for purposes of computing the Idaho income tax. These rules include the following: (4-6-23) a. The portion of an electing small business trust that consists of stock in one (1) or more S corporations will be treated as a separate trust. (4-6-23) b. The tax on the separate trust will be determined with the following modifications from the usual rules for taxing trusts: (4-6-23) i. The only items of income, loss, deduction, or credit to be taken into account are the items required to be taken into account as an S corporation shareholder under Section 1366, Internal Revenue Code, and any gain or loss from the disposition of stock in an S corporation. (4-6-23) ii. As provided in federal Treasury Regulations, administrative expenses will be taken into account to the extent allocable to the items described in Subparagraph 078.01.b.i. (4-6-23) iii. A deduction or credit will be allowed only for an amount described in this paragraph. No item described in this paragraph will be apportioned to any beneficiary. (4-6-23) c. A capital loss deduction provided by Section 1211(b), Internal Revenue Code, will be allowed only to the extent of capital gains. (4-6-23) 079. -- 104. (RESERVED) 105. ADJUSTMENTS TO TAXABLE INCOME -- ADDITIONS REQUIRED OF ALL TAXPAYERS (RULE 105). Section 63-3022, Idaho Code. The following must be added by all taxpayers in computing Idaho taxable income. (4-6-23) 01. Interest and Dividend Income Exempt From Federal Taxation. Certain interest and dividend income that is exempt from federal income tax must be added. (4-6-23) a. If a taxpayer has both Idaho and non-Idaho state and municipal interest income, expenses not allowed pursuant to Sections 265 and 291, Internal Revenue Code, must be prorated between the Idaho and non- Idaho interest income as provided in Subsections 105.04.b.i. and 105.04.b.ii. The addition to taxable income required for non-Idaho state and municipal interest income must be offset by the expenses prorated to that interest income. The allowable offset may not exceed the reportable amount of interest income. An unused offset may not be carried back or carried over. A schedule showing the interest and related offsets must be attached to the return. (4-6-23) i. Expenses prorated to Idaho state and municipal interest income are based on the ratio of Idaho state and municipal interest income to total state and municipal interest income. (4-6-23) ii. Expenses prorated to non-Idaho state and municipal interest income are based on the ratio of non- Idaho state and municipal interest income to total state and municipal interest income. (4-6-23) IDAHO ADMINISTRATIVE CODE IDAPA 35.01.01 Idaho State Tax Commission Income Tax Administrative Rules Section 107 Page 18 02. Special First-Year Depreciation Allowance. The amount of depreciation computed for federal income tax purposes that exceeds the amount of depreciation computed for Idaho income tax purposes must be added. (4-6-23) 106. (RESERVED) 107. ADJUSTMENTS TO TAXABLE INCOME -- ADJUSTMENTS REQUIRED ONLY OF TAXPAYERS REPORTING NONBUSINESS INCOME (RULE 107). Section 63-3027(a)(4), Idaho Code. All deductions relating to the production of nonbusiness income will be allocated with the income produced. (4-6-23) 108. -- 114. (RESERVED)