Michigan assistance - pension exclusion

[FEDUKE404]

I am preparing a non-resident Michigan return for a client. The foreign income is solely from a Sch K-1 where all of the income was MI sourced.

The client is also receiving payments from two (inherited) IRA accounts. There is no connection between them and the MI income. Such income is being reported, in full, on the home state return. I have already calculated the "federal" income and the "MI" income for columns B and C of the Michigan Schedule NR.

Apparently MI has various pension exclusions that can be considered for subtraction such as shown on line 12 of Schedule 1 of MI-1040.

I am getting tangled up on the "private" pension eligibility, i.e. something that is NOT State of MI or military retirement, which has an exclusion. The dollar amounts of the IRAs are small enough so, if they qualify for the exclusion, the entire amount could be used as a "subtraction."

So, can I exclude (with the rules) the IRA payments as a MI only subtraction??

Thanks.

FE

[JohnH]

While you're waiting for a response from someone familiar with MI rules, I'll say something. If I'm understanding your quesiton right, the pension income is already excluded in full on the MI NR allocations schedule because it's taxed in the resident state. If so, I don't see how a partial pension exclusion could then be claimed to further reduce the K-1 income. I think this falls under the "dance with the one that brung ya" rule for adjustments to income. (But I don't have a cite to offer...)

[FEDUKE404]

Exclusion issues

While you're waiting for a response from someone familiar with MI rules, I'll say something. If I'm understanding your quesiton right, the pension income is already excluded in full on the MI NR allocations schedule because it's taxed in the resident state. If so, I don't see how a partial pension exclusion could then be claimed to further reduce the K-1 income. I think this falls under the "dance with the one that brung ya" rule for adjustments to income. (But I don't have a cite to offer...)

Not necessarily. If I am reading things correctly, there is obviously the issue of what the actual "MI" income is (what the taxpayer receives from MI sources). That is an easy one to answer.

The companion question is whether, perhaps, the pension income might be excluded from the TOTAL income (non-MI) calculation for purposes of the MI/total ratio. The K-1 income itself is not being "reduced" in any way. (The NR income remains that shown on the K-1). Even NC will have some tweaks for PY/NR returns for non-NC income that still enters into the overall calculations, i.e. how NC would have taxed such and such IF it was from a NC source.

I'm sure a MI expert will straighten it out for us.

FE