Does a trust or estate that owed federal alternative minimum tax for 1986 have to recompute that AMT for its Nebraska fiduciary income tax return, and how?

Plain-English summary

For 1986, Nebraska computed a trust's or estate's income tax as a percentage of its federal income tax before credits. The federal alternative minimum tax (AMT) -- a parallel tax designed to keep high-income filers from zeroing out their tax with deductions and preferences -- is part of that federal liability. But the federal AMT is figured using federal credits and items of income that Nebraska does not tax. This ruling explains that a fiduciary who owed federal AMT for 1986 must recompute the AMT for Nebraska before folding it into the Nebraska return.

The core holding: "The alternative minimum tax computation, Federal Form 6251, is to be recalculated for Nebraska fiduciary income tax purposes to determine the federal income tax before credits."

The mechanics the ruling lays out:

• Why recompute. The federal AMT reported on the return reflects federal credits and federal income that is not includible in the Nebraska tax base. Because the federal tax used for Nebraska must be computed without any allowance for federal credits, fiduciaries required to compute AMT on their 1986 federal return must recompute Federal Form 6251 for Nebraska.
• Line-by-line adjustments on Form 6251. On Line 1, a fiduciary with undistributed income from U.S. government obligations (which Nebraska does not tax) or other allowable Nebraska adjustments makes those adjustments to the fiduciary's adjusted gross income and enters the adjusted amount. On Line 9, enter the regular federal income tax before credits (from the 1986 Federal Form 1041, or as computed on the Nebraska adjusted federal taxable income on line 8 of Form 1041N). Then follow the federal instructions through Line 10 of Form 6251.
• Deferred minimum tax from loss years. If a net operating loss carryover deferred minimum tax in an earlier year, add the recomputed deferred minimum tax to line 10, using the Nebraska revenue ruling in effect for the year the loss carryforward arose, and attach a schedule.
• Putting it on the Nebraska return. The recomputed AMT (plus any deferred minimum tax) is added to the regular federal tax and any tax on the ordinary-income part of lump-sum retirement-plan distributions to produce the federal income tax entered on line 9 of the 1986 Form 1041N. For nonresident fiduciaries, the recomputed AMT is included in the tax on line 22 of Nebraska Schedule I. Attach the recomputed Federal Form 6251 (or Form 4626) and all schedules.
• All open years, not just 1986. The add-on minimum tax and AMT are to be recomputed for all taxable years beginning after December 31, 1979. The ruling points to companion revenue rulings for the specific line changes in earlier years -- 23-85-1 (1985), 23-84-1 (1984), 23-83-1 (1983), 23-82-3 (1982), 23-82-1 (1981), and 23-82-2 (1980 and 1979).

What this means for you

Trustees and executors filing a 1986 Nebraska fiduciary return

If the trust or estate owed federal AMT, you cannot just carry the federal AMT number onto the Nebraska return. You recompute Form 6251 stripping out federal credits and any income Nebraska does not tax (such as undistributed U.S. government interest), then add the result into the federal-tax figure on Form 1041N.

Fiduciaries holding U.S. government obligations

The undistributed income from U.S. government obligations that Nebraska exempts must be adjusted out on Line 1 of the recomputed Form 6251, which can lower the Nebraska AMT relative to the federal figure.

Accountants preparing amended or prior-year fiduciary returns

The recomputation is not unique to 1986 -- it applies to every tax year beginning after December 31, 1979, with the earlier-year mechanics spelled out in the companion 23-8x-series rulings. Match each year to its ruling, and confirm current Nebraska fiduciary and minimum-tax law before applying this to any live filing, since both federal and Nebraska minimum-tax rules have changed substantially since 1986.

Common questions

Q: Does a trust or estate have to recompute federal AMT for Nebraska?
A: Yes, if it owed federal AMT. Nebraska's fiduciary tax is based on federal tax before credits, so Form 6251 must be recalculated for Nebraska without federal credits and without income Nebraska does not tax.

Q: What is the main adjustment on the recomputed Form 6251?
A: On Line 1, back out undistributed U.S. government obligation income and any other allowable Nebraska adjustments to the fiduciary's adjusted gross income; on Line 9, use the regular federal tax before credits.

Q: Where does the recomputed AMT go on the Nebraska return?
A: Into the federal income tax on line 9 of Form 1041N (added to regular tax and any tax on the ordinary-income part of lump-sum distributions). For nonresident fiduciaries, it goes on line 22 of Nebraska Schedule I.

Q: Does this only apply to 1986?
A: No. The recomputation applies to all tax years beginning after December 31, 1979, with earlier years handled under the companion revenue rulings (23-85-1 through 23-82-2).

Citations and references

• Nebraska Revenue Ruling 23-86-1, "Fiduciary Income Tax -- Computation of 1986 Alternative Minimum Tax To Determine Federal Income Tax Before Credits for the 1986 Nebraska Return" (Nebraska Department of Revenue, issued January 1987; approved by State Tax Commissioner Donald S. Leuenberger).
• Federal Form 6251 (alternative minimum tax) and Federal Form 4626 (add-on minimum tax), recomputed for Nebraska; Federal Form 1041 (U.S. Fiduciary Income Tax Return).
• Nebraska Form 1041N (Nebraska Fiduciary Income Tax Return) and Nebraska Schedule I (nonresident fiduciaries).
• Companion Nebraska revenue rulings referenced for earlier years: 23-85-1 (1985), 23-84-1 (1984), 23-83-1 (1983), 23-82-3 (1982), 23-82-1 (1981), 23-82-2 (1980 and 1979).

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/rr238601_alt_min.pdf

Source-quality note: This ruling survives only as a scan and the machine-extracted text below has OCR artifacts (garbled headings, "Fonv 62s1" for "Form 6251", "line 254" for a Form 1041 line, and a garbled date block). The holding, the reason for recomputation, the Line 1/Line 9/Line 10 adjustments, the placement on Form 1041N and Schedule I, and the post-1979 scope with its companion-ruling table are legible and are the basis for this summary.

Original ruling text

Revenue Ruling 23-86-1

Fiduciarv lncome Tax - Computation of 1986 Alternative Minimum Tax To
Determine Federal lncome Tax Before Credits for the 1986 Nebraska
Return. THE ALTERNATIVE MINIMUM TAX COMPUTATION, FEDERAL
Fonv 62s1, rs ro BE REcALcULATED FoR NEBRAsKA FtDUctARy
INCOME TAX PURPOSES TO DETERMINE THE FEDERAL INCOME TAX
BEFORE CREDITS.

Advice has been requested whether the alternative minimum tax as computed for a taxpayer's 1986 U . S . Fiducia ry I ncome Tax Retu rn, Federal
Form 1041 , must be added to the regular federal income tax before federal credits and the tax on the ordinary income part of lump-sum
distributions from qualified retirement plans, if applicable, to compute
the Nebraska income tax.
Federal credits and federal income not includible in the Nebraska tax
base are used to determine the amount of the alternative minimum tax
reported on the federal return. The amount of federal income tax used
to determine the Nebraska income tax must be computed without any allowance for federal credits. Therefore, f iduciaries required to compute
the alternative minimum tax with their 1986 federal return are to recompute Federal Form 6251 for Nebraska purposes. The specif ic line entries
to be altered in recomputing the alternative minimum tax for the 1986
Nebraska Fiduciary lncome Tax Return, Form 1041N. àre provided below.
1986 Federal Form 6251:

Line 1 . For f iduciaries with undistributed income f rom U. S. government obligations or other allowable Nebraska adjustments to federal

taxable income, make the adjustment(s) to the adjusted gross
income of the fiduciary. Enter the adjusted amount on the Federal
Form 6251 which is being recomputed for Nebraska purposes.
Line 9. Enter regular federal income tax before credits from
line 254, 1986 U.S. Fiduciary lncome Tax Retunn, Federal
Form 1041, or as computed on the Nebraska adjusted federal taxable
income reported on line 8, Form 1041N.
Follow federal instructions to compute the alternative minimum tax
through line 10 of the 1986 Federal Form 6251.

lf a net operating loss carryover from an earlier year(s) reduces taxable income for 1986, and the net operating loss giving rise to the
carryover resulted in the deferral of minimum tax in the earlier
year(s), all on a part of the deferred tax may be includible as federal
tax liability- for 1986. Add to line 10 of the recomputed 1986
Form 6251 , the amount of any deferred minimum tax, recomputed for

Revenue Ruling No. 23-86-1

Page 2

Nebraska purposes in accordance with the revenue ruling in effect for
the yea r in wh ich the loss ca rryforwa rd occu rred . Attach a schedule

with all calculations.

The add-on minimum tax and the alternative minimum tax are to be recom-

puted for all taxable years beginning after December 3,l, 1g7g" The
specific line entries on the Federal Foim 4626 and Federal Form G251 to
be altered in the recomputation for Nebraska are provided for the following tax years:
Tax Year

1985
1984
1983
1982
1981
1980, 1979

Revenue Rulinq Reference
æ-85-1
23_84_1
23_83_1
23_82_3
23_82_1

23-82-2

Any recomputed minimum tax deferred from earlier years plus line l0 of
the recomputed 1986 Federal Form 6251 are to be adde¿ to the total
of
the regular tax reported on line 254 of 1986 Federal Form 1041 and the
tax on the ordinary income part of lump-sum distributions fnom qualified
retirement plans, if applicable, to determine the amount of federal
income tax to enter on line g of the 1986 Form 1041N. For fiduciaries
with undistributed income f rom U. S. government obligations, the recomputed taxes are 'to be added to the regular fedãral income tax as
computed on Nebraska adjusted federal tlxable income reported on
line 8, Form 1041N, plus the tax on the ordinary incomä part of
lump-sum distributions f rom qualified retirement plans, if apilicable,
to determine the amount of federal income tax to enter on'line 9 of
Form 1041N. For nonresident fiduciaries, the recomputed alternative
minimum tax or minimum tax, if applicable, is included as part of the
tax on line 22 of Nebraska Schedule l.

Attach the recomputed Federal Form 6251 or Federal Form 4626, if
applicable, and all related schedules or comp utation s to the 1986
Form 1041N when filed"
ED

na ld S. Leuenberger
State Tax Commissioner

January

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