42.30.204    ELECTING SMALL BUSINESS TRUST (ESBT)

(1) The portion of an ESBT that consists of stock in one or more S corporations is treated as a separate trust for purposes of determining Montana tax liability. The tax, as provided in 15-30-2153, MCA, must be calculated separately and reported on a Montana Income Tax Return for Estates and Trusts (Form FID-3).

(2) To determine Montana taxable income for the portion of the ESBT that holds S corporation stock, federal ESBT taxable income is adjusted for Montana additions to, and subtractions from, income as provided in 15-30-2152, MCA, and ARM 42.30.104. The following are not included in this calculation:

(a) deductions for capital losses that exceed capital gains;

(b) an income distribution deduction;

(c) an exemption deduction;

(d) passive losses in excess of passive income; and

(e) ordinary losses in excess of ordinary income.

(3) An ESBT is allowed a capital gains tax credit. If an ESBT is allowed a nonrefundable credit, such as the capital gains tax credit, items from the non-ESBT portion of the trust cannot be used to calculate the credit.

(4) If the portion of a resident ESBT that has S corporation stock receives taxable income that is sourced to multiple states or countries, the ESBT reports all taxable income in the calculation of Montana taxable income. If the resident ESBT pays income tax on income sourced to another state or country, the trust will receive a credit for income taxes paid to that other state or country as provided in 15-30-2302, MCA. If the trust is either a part-year resident or a nonresident, the trust will separately calculate tax on its Montana source income as provided in 15-30-2104, MCA.

History: 15-1-201, 15-30-2104, 15-30-2620, MCA; IMP, 15-30-2104, 15-30-2111, 15-30-2112, 15-30-2151, 15-30-2152, 15-30-2153, 15-30-2603, MCA; NEW, 2016 MAR p. 22, Eff. 1/9/16.