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 publication of the entire text of the material that 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
Section 1211
|
$10,000
|
$5,000
|
|
|
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 Short-term
|
$10,000
|
$5,000
|
$15,000
|
|
Gain (loss) Long-term
|
$1,000
|
($1,000)
|
$0
|
|
Gain (loss) Section 1211
|
($8,000)
|
$3,000
|
($5,000)
|
|
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
|
(3) Social Security benefits that are
included in federal adjusted gross income (AGI) must be allocated between
spouses on the Individual Income Tax Return - Long Form, Form MO-1040, for the
appropriate tax year. They must be allocated between spouses based on the
proportionate share of gross Social Security benefits received by each spouse,
multiplied by the portion of the benefits included in federal taxable income.
(A) Example: A husband receives eight
thousand dollars ($8,000) in Social Security benefits and the wife receives two
thousand dollars ($2,000), for total gross benefit of ten thousand dollars
($10,000). The husband's proportionate share is eighty percent (80%) and the
wife's is twenty percent (20%). If four thousand dollars ($4,000) in benefits
were included in federal taxable income, then the husband's allocated portion
on the Missouri return would be three thousand two hundred dollars ($3,200) and
the wife's portion would be eight hundred dollars ($800). This is arrived at by
multiplying four thousand dollars by eighty percent ($4,000 × 80%) for
the husband and four thousand dollars by twenty percent ($4,000 × 20%)
for the wife. These amounts must be used in calculating the Missouri AGI of the
husband and wife.
(4) In
general, if a married couple files a combined Missouri income tax return, the
combined Missouri adjusted gross income equals the sum of each spouse's
separate Missouri adjusted gross income. The spouse's separate Missouri
adjusted gross income equals the federal adjusted gross income reportable by
the spouse had the spouse filed a separate federal return, as adjusted by the
modifications under sections
143.121 and
135.647, RSMo.
(A) Examples.
1. A married couple reported federal adjusted
gross income of thirty-two thousand dollars ($32,000) on their joint federal
income tax return. On their combined Missouri income tax return, one (1) spouse
reported separate federal adjusted gross income of thirty-eight thousand
dollars ($38,000), and the other spouse reported separate federal adjusted
gross income of negative six thousand dollars (-$6,000). The combined Missouri
adjusted gross income equals thirty-two thousand dollars ($32,000)
(thirty-eight thousand dollars ($38,000) plus negative six thousand dollars
(-$6,000)).
2. A married couple
reported federal adjusted gross income of thirty-nine thousand dollars
($39,000) on their joint federal income tax return. On their combined Missouri
income tax return, one (1) spouse reported separate federal adjusted gross
income of thirty-eight thousand dollars ($38,000), and the other spouse
reported separate federal adjusted gross income of one thousand dollars
($1,000) and a five thousand dollar ($5,000) subtraction for interest from
exempt U.S. government obligations. The combined Missouri adjusted gross income
equals thirty-four thousand dollars ($34,000) (thirty-eight thousand dollars
($38,000) plus negative four thousand dollars (-$4,000)).
3. A married couple reported federal adjusted
gross income of thirty-nine thousand dollars ($39,000) on their joint federal
income tax return. On their combined Missouri income tax return, one (1) spouse
reported separate federal adjusted gross income of thirty-eight thousand
dollars ($38,000), and the other spouse reported separate federal adjusted
gross income of one thousand dollars ($1,000) and a five thousand dollar
($5,000) subtraction for a contribution to a Missouri Savings for Tuition
(MOST) account. The combined Missouri adjusted gross income equals thirty-eight
thousand dollars ($38,000) (thirty-eight thousand dollars ($38,000) plus zero)
because the MOST subtraction is limited to the spouse's Missouri adjusted gross
income.
(5) The
form Individual Income Tax Return - Long Form, MO-1040 is incorporated by
reference and made a part of this rule as published by Missouri Department of
Revenue, and available at
www.dor.mo.gov or Harry S Truman State
Office Building, 301 W. High Street, Jefferson City, MO 65101, dated May 3,
2023. This rule does not incorporate any subsequent amendments or
additions.
(6) The federal form
1040 U.S. Individual Income Tax Return is incorporated by reference and made a
part of this rule as published by United States Internal Revenue Service, and
available at
www.irs.gov or Harry S
Truman State Office Building, 301 W. High Street, Jefferson City, MO 65101,
dated May 3, 2023. This rule does not incorporate any subsequent amendments or
additions.
Notes
12 CSR
10-2.010
AUTHORITY:
sections 143.031,
143.111,
143.181, and
143.961, RSMo 2016, and section
135.647, RSMo Supp. 2023.* This
rule was previously filed as Income Tax Release 73-11, Jan. 29, 1974, effective
Feb. 8, 1974. Amended: Filed Oct. 2, 2018, effective April 30, 2019. Amended:
Filed July 17, 2023, effective Feb. 29, 2024.
AUTHORITY: section
143.961, RSMo 1986.* This rule
was previously filed as Income Tax Release 73-11, Jan. 29, 1974, effective Feb.
8, 1974.
Amended by
Missouri
Register March 15, 2019/Volume 44, Number 6, effective
4/30/2019
Amended by
Missouri
Register January 16, 2024/volume 49, Number 02, effective
2/29/2024.
