How does an estate or trust recompute the 2007 federal alternative minimum tax to figure the Nebraska minimum tax on Form 1041N?

Plain-English summary

This is the fiduciary version of Nebraska's annual alternative-minimum-tax recompute ruling -- it applies to estates and trusts filing the Nebraska Fiduciary Income Tax Return, Form 1041N, for 2007. (The individual-income-tax counterpart for the same year is Revenue Ruling 22-07-1.)

Why a recompute is needed. If an estate or trust owes federal alternative minimum tax (AMT) -- figured on Federal Form 1041, Schedule I -- Nebraska imposes its own minimum tax on that AMT recomputed under Nebraska rules. Under Neb. Rev. Stat. § 77-2717, the AMT is recomputed by substituting Nebraska taxable income for federal taxable income and adjusting any item reflected differently for Nebraska. The main § 77-2716 adjustments are:

• exclude interest and dividends from U.S. government obligations (see Fiduciary Income Tax Regulation 23-004.03A);
• include interest and dividends from non-Nebraska state or local obligations; and
• exclude any non-Nebraska income from an S corporation or LLC, and exclude the associated preference items to the same extent.

The 2007 line-by-line substitutions (Federal Form 1041, Schedule I). Recalculate all total/computation lines; every other entry stays the same as the federal AMT computation:

• Part I: Line 1 -- reduce the federal entry by the amounts on lines 3 and 8 of Form 1041N and add the line 5 amount from Form 1041N; Line 7 -- Nebraska-adjusted NOL deduction; Line 8 -- tax-exempt interest only from Nebraska private activity bonds issued after August 7, 1986; Line 24 -- Nebraska-adjusted alternative tax NOL deduction.
• Part II: Line 31 -- tax-exempt interest from Nebraska bonds (other than amounts on line 8).
• Part III: Line 52 -- if Part IV was used, exclude capital gains excluded on line 8 of Form 1041N; Line 53 -- enter zero; Line 55 -- regular federal tax before credits on the Line 1 income (using the same federal method as Form 1041 line 23), without subtracting any foreign tax credit.

Where the answer goes. Follow the federal instructions through Part III, line 56 of the recomputed Schedule I, then enter that line 56 amount on line 1 of the Nebraska Minimum or Other Tax Worksheet (page 5 of the Form 1041N instructions). Complete the worksheet to find the amount for line 11 of the 2007 Form 1041N, and attach the recomputed Schedule I.

What this means for you

Estates and trusts with 2007 federal AMT

A fiduciary that had federal AMT for 2007 must recompute Schedule I of Form 1041 using the Nebraska substitutions above, run line 56 through the Nebraska Minimum or Other Tax Worksheet, and attach the recomputed Schedule I to Form 1041N. The federal number does not carry over unchanged.

Filers looking at other tax years

This ruling is specific to 2007 and the line references change year to year. The Department issues a parallel fiduciary ruling annually -- for 2006, 2005, and 2004 the rulings are 23-06-1, 23-05-1, and 23-04-1. Use the ruling that matches your tax year.

Common questions

Q: Does this apply to individuals?
A: No. This is the fiduciary (estate and trust) ruling for Form 1041N. Individuals use the corresponding individual-income-tax ruling (for 2007, Revenue Ruling 22-07-1).

Q: What statute requires the Nebraska recompute for fiduciaries?
A: Neb. Rev. Stat. § 77-2717 requires the federal minimum tax to be recomputed by substituting Nebraska taxable income and applying the Nebraska adjustments.

Q: Can I reuse these line numbers for a different year?
A: No. Use the Department's ruling for the actual tax year, since the Schedule I line entries and worksheet references drift from year to year.

Citations and references

• Neb. Rev. Stat. § 77-2717 -- requires the federal additional/minimum taxes to be recomputed by substituting Nebraska taxable income for fiduciary income tax purposes.
• Neb. Rev. Stat. § 77-2716 -- the Nebraska income modifications applied in the recompute.
• Fiduciary Income Tax Regulation 23-004.03A -- exclusion of interest or dividends from U.S. obligations.
• Companion rulings -- 23-06-1 (2006), 23-05-1 (2005), and 23-04-1 (2004); individual-tax counterpart 22-07-1 (2007).

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr230701.pdf

Original ruling text

REVENUE RULING 23-07-1
January 31, 2008
Fiduciary Income Tax-Computation of 2007 Alternative Minimum Tax to Determine Nebraska
Minimum Tax for the 2007 Nebraska Return. ALTERNATIVE MINIMUM TAX-FIDUCIARIES,
FEDERAL FORM 1041, SCHEDULE I, SHALL BE RECALCULATED FOR NEBRASKA
FIDUCIARY INCOME TAX PURPOSES TO DETERMINE THE NEBRASKA ALTERNATIVE
MINIMUM TAX.
Advice has been requested as to whether the alternative minimum tax computed for a taxpayer’s
2007 U.S. Fiduciary Income Tax Return, Federal Form 1041, Schedule I, must be recalculated in
order to compute the Nebraska income tax.
Nebraska law imposes a tax on the federal alternative minimum tax recomputed to take into account
the adjustments required by the Nebraska Revenue Act of 1967, as amended. Section 77-2717 of the
Nebraska Revised Statutes provides that the additional taxes shall be recomputed by substituting
Nebraska taxable income for federal taxable income and adjusting the Nebraska alternative
minimum tax calculations for any items which are reflected differently in the determination of
federal taxable income for Nebraska purposes. This applies to any federal schedules or other forms,
the results of which are used in calculating the federal alternative minimum tax.
For instance, Section 77-2716 of the Nebraska Revised Statutes provides for the exclusion from
taxable income of interest or dividends from U.S. obligations as set forth in Fiduciary Income
Tax Regulation 23-004.03A and the inclusion of interest or dividends from non-Nebraska source
state or local obligations. Section 77-2716 also provides for the exclusion from Nebraska taxable
income of any non-Nebraska income from an S-corporation or LLC. Therefore, any associated
preference item derived from the S-corporation or LLC included in the alternative minimum tax
calculations should be excluded to the same extent in the Nebraska computation.
The specific line entries and the required adjustments in re-computing the minimum tax for the
2007 Nebraska Fiduciary Income Tax Return, Form 1041N, are provided below. Recalculate all
total or computation lines to reflect adjustments made pursuant to this ruling. All other entries
must be the same as for the federal minimum tax computation.
2007 Federal Form 1041, Schedule I:
Part I:
Line 1.

Reduce the federal entry by the amounts on lines 3 and 8 of Form 1041N and add the
line 5 amount from Form 1041N.

Line 7.

Enter the net operating loss deduction as adjusted for Nebraska purposes.

Line 8.

Enter the tax-exempt interest only from Nebraska private activity bonds issued after
August 7, 1986.

Line 24.

Enter the alternative tax net operating loss deduction as adjusted for Nebraska
purposes.

Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818

Revenue Ruling 23-07-1

January 31, 2008

Page 2 of 2

Part II:
Line 31.

Enter the tax-exempt interest from Nebraska bonds (other than amounts included on
line 8).

Part III:
Line 52.

If Part IV of Schedule I, 2007 Federal Form 1041, was used to make the line 52 entry,
exclude any capital gains in the calculation that were excluded on Line 8 of Form
1041N.

Line 53.

Enter zero.

Line 55.

Compute the regular federal income tax before credits on the Line 1 income as entered
above. The same federal tax method used to complete line 23, Federal Form 1041, is to
be used. Enter the computed amount without subtracting any foreign tax credit.

Follow federal instructions to re-compute the alternative minimum tax through Part III, line 56 of
Schedule I, Federal Form 1041.
Enter line 56, Part III, of the recomputed Schedule I, 2007 Federal Form 1041, on line 1 of the
Nebraska Minimum or Other Tax Worksheet found on page 5 of the instructions for Form 1041N.
Complete the worksheet to determine the amount to enter on line 11 of the 2007 Form 1041N.
The recomputed Schedule I, Federal Form 1041, must be attached to the 2007 Nebraska Fiduciary
Income Tax Return, Form 1041N, when filed.
The add-on minimum tax and the alternative minimum tax are to be recomputed for all taxable years
beginning after December 31, 1978. The specific line entries on Federal Form 1041, Schedule I,
that are to be altered in the re-computation for Nebraska are provided for the following tax years:
Tax Year

Revenue Ruling
Reference

2006

23-06-1

2005

23-05-1

2004

23-04-1

APPROVED:

Douglas A. Ewald
State Tax Commissioner
January 31, 2008