(1) Amounts used to calculate a Montana net operating loss (NOL) for decedents' estates and trusts cannot be distributed to a beneficiary as reportable tax items on the beneficiary's Montana tax return unless the distribution occurs with the filing of the final year return as provided in Internal Revenue Code (IRC) section 642(h) and 26 CFR 1.642(h)-1. If any excess NOL deduction can be distributed to the beneficiaries, the distribution must be part of the excess Montana NOL deduction, not the excess federal NOL deduction.
(2) A decedent's estate or trust has a Montana NOL if Montana taxable income, recomputed with the adjustments provided in IRC section 172(d), is less than zero. To recompute Montana taxable income, the following must be added back:
(a) any net operating loss deduction;
(b) any deduction for an exemption provided in 15-30-2152, MCA;
(c) any gain excluded from the sale or exchange of qualified small business stock pursuant to IRC section 1202;
(d) the amount by which a deduction for losses from sales or exchanges of capital assets exceeds the amount includable for gains from sales or exchanges of capital assets;
(e) the amount by which nonbusiness deductions exceed nonbusiness income;
(f) the domestic production activities deduction;
(g) total charitable deductions; and
(h) the income distribution deduction.
(3) To determine the portion of a deductible expense attributable to income from a trade or business, the expense must be multiplied by the ratio of net income from the trade or business to Montana adjusted gross income. When calculating the portion of federal tax attributable to trade or business income, the ratio must be calculated using the net business income and Montana adjusted total income for the year the federal tax was incurred.
(4) An election to waive the carryback of an NOL loss for an estate or trust is irrevocable. If a fiduciary elects to waive the carryback, the election must be made by the due date (including extensions of time) for filing the estate or trust's tax return in the tax year of the NOL.
(5) This rule is effective for tax years beginning after December 31, 2015.