Conceptual question for any of you state compliance/SALT people out there, but is anyone familiar with Reg. Sec. 1.1502-12, separate taxable income? Some states require using this as...(continued)

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It depends

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So the system automatically calculates it without regards to limitations because you’re doing a consolidated return for Fed that applies the limitations at that level. But yes, for separate states you need to recompute (depending on their carryforward and limitation rules). We usually just do this by including a FTI recon statement. And yes, it is a lot of tracking.

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A matrix will be 25k please 😂

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Sorry can't help

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Only 25, that’s a steal

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...their starting point, federal TI. What we've done for our client on these types of returns is use "recomputed TI", where we apply any limitations, such as for CC, or capital gain/loss, at the individual company level. But this regulation makes it sound like you're supposed to compute an income number that is WITHOUT REGARD to these items.

Give you an example - let's say we have a member that's part of a consolidated filing that has $10K of CC, and $50K of TI before CC. For the consolidated federal filing, we would let those CC flow to the top to be analyzed with all the group and show $40K TI in our software. For recomputed, we would perform the limitation at the member level - $50K x 10% = $5,000 CC deduction allowed; recomputed TI is $45,000. If this reg says to compute without regard to, would "separate taxable income" be 50K of income?

I've never seen a federal TI starting point for a state return computed this way; I've only seen recomputed as described above. Does anyone have any insight?

I’ve only seen it as limited on a separate basis. Don’t think it would make much sense otherwise. Your starting point is to be as if you filed as that state filing entity (whether combined or separate) for federal purposes. However I am not going to act like I read the reg in detail and am very curious if anyone has done this different.

OP - I have the exact question. The system automatically recomputes taxable as if a consolidated return would be filed. I think it makes sense, but it will be hard to track these attributes separately for state purpose. Are you working this from SALT or federal side?

KPMG 1... you are making general assumption on separate states conformity to 1.1502, which probably isn’t accurate... but hey, close enough right

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