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Pro Series recalculates the passive loss limitation due to bonus depr adjustments for Indiana. Many Indiana CPAs say no recalculation, only enter adjustment amounts ??

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last updated ‎December 07, 2019 6:20 AM
 
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Level 15
last updated ‎December 07, 2019 6:20 AM

My understanding is that the IN CPA's are right because Title 6 of the Indiana Code does not provide for any adjustment for PAL but specifically requires adjustments for bonus depreciation and §179 deduction.  This is not unreasonable except it does create a timing difference in terms of recognition of income and loss, which would ultimately be reconciled at the disposition of the asset in question because IN provides an adjustment for the difference in adjusted basis (as part of a 3-step approach).

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Level 15
last updated ‎December 07, 2019 6:20 AM

My understanding is that the IN CPA's are right because Title 6 of the Indiana Code does not provide for any adjustment for PAL but specifically requires adjustments for bonus depreciation and §179 deduction.  This is not unreasonable except it does create a timing difference in terms of recognition of income and loss, which would ultimately be reconciled at the disposition of the asset in question because IN provides an adjustment for the difference in adjusted basis (as part of a 3-step approach).

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last updated ‎December 07, 2019 6:20 AM
Thanks itonewbie.  I think Indiana wants to keep it a relatively easy adjustment, just a different depreciation method for State (as in Book, Federal and State depreciation methods).  For some reason ProSeries appears to be taking the Indiana instructions to the extreme:  "Figure the net income (or loss) that would have been included in federal adjusted gross income had the bonus depreciation method not been used."   And assuming this recalculated AGI would include a recalculated PAL.  So you would end up with a Federal PAL and a State PAL.  
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Level 15
last updated ‎December 07, 2019 6:20 AM
Glad to be of help.

I can see how they take this literally but this is not what the legislature intended or how the DoR applies the law.  This Commissioner's Directive clearly lays out the adjustments required and PAL is not part of the equation: https://www.in.gov/dor/reference/files/cd19.pdf
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last updated ‎December 07, 2019 6:20 AM
I agree with itonewbie 100%.  I had previously read that directive which I agree indicates the federal AGI starting point is unchanged except for the depreciation adjustment itself.  Other tax software which is more robust than ProSeries computes this correctly in agreement with other CPAs.  And by the way, these other programs will compute the new "Business Loss Limitation with Form 461 whereas ProSeries totally ignores this new limitation.
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Level 15
last updated ‎December 07, 2019 6:20 AM
Time for Intuit to step up their game!
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