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Form M2

Inter Vivos Trust. A trust created during a

Before you complete Form M2, you

income or gains not taxed by Minnesota. An

grantor’s lifetime.

example of this would be expenses incurred

must fi rst complete the following;

in connection with a probate proceeding in

Testamentary Trust. A trust created by a

you will need to refer to them:

another state. [M.S. 290.17, subd. 1(b)].

decedent’s will that comes into existence at

Losses not allowed by Minnesota. Include

the death of the decedent.

• Federal Form 1041 and support-

your total losses from non-Minnesota

Section 645 Election. Allows a qualifi ed

ing schedules; and

sources to the extent the losses are deducted

revocable trust to be treated and taxed as

• Schedule KF for each nonresident

in determining your federal taxable income

part of the related estate during the election

or loss.

benefi ciary and for any Minne-

period. If the election is made for federal

income tax purposes, it also applies for

Common examples of losses to include on

sota benefi ciary who has adjust-

Minnesota. Enclose a copy of federal Form

line 2 are:

ments to income (see page 9).

8855 or letter making the election.

• losses deducted on the sale or other dispo-

Tax Year

sition of real or tangible property outside

Nonresident. Check the Nonresident box

Minnesota,

If you are fi ling on a fi scal year basis, be sure

if a nonresident trust/estate. Refer to the

• casualty losses deducted on prop erty out-

to enter the beginning and ending dates.

defi nitions of a resident trust/estate on page

side Minnesota,

Without the dates, your fi ling and payments

1 of the Form M2 instructions to determine

• losses deducted on the operation of a farm

may not be considered timely.

whether your trust/estate qualifi es.

outside Minnesota,

Minnesota Tax ID Number

Line Instructions

• out-of-state losses from partnerships,

Be sure to put your Minnesota tax ID num-

S corporations and other fi duciaries,

Trust and estate income is based on income

• losses deducted on the operation of a trade

ber on Form M2. Without it, processing of

from Minnesota sources only. Th erefore, any

the return is delayed, and your estimated

or business from sources out side Minne-

non-Minnesota losses that are allocated to

tax and extension prepayments cannot be

sota, and

the fi duciary must be added back to federal

• losses deducted on the sale or other dis-

verifi ed and credited properly.

taxable income, and non-Min nesota income

position of stocks, bonds, securi ties and

Check Boxes

other intangible property by nonresident

and gains must be sub tracted from federal

estates and trusts.

taxable income.

Place an X in all boxes that apply to the

Line 3

return that you are fi ling.

Intangible income earned by a resident estate

Capital Gain of Lump Sum Distribution

or trust is considered Minnesota source

Final return. For income tax purposes,

If you received a qualifying lump-sum

income. Intangible income is income from

Minnesota follows federal law on termina-

distribution in 2014 and chose the capital

intangible personal property, such as stocks or

tion of estates and trusts. All income, de-

gain election on federal Form 4972, enter the

bonds. [M.S. 290.17, subd. 2(c)]

ductions and credits are passed through to

capital gain from line 6 of federal Form 4972.

the benefi ciaries. If this is your fi nal return,

Include a copy of federal Form 4972 when

Round amounts to whole dollars. Drop

check the box on the front of Form M2.

you fi le Form M2.

amounts less than 50 cents and increase

Initial return. If this is the fi duciary’s fi rst

amounts 50 cents or more to the next higher

Lines 4 and 6

dollar.

return fi led in Minnesota, check the box on

Additions and Subtractions

the front of the form.

Line 2

Read the instructions under Allocation of

Bankruptcy estate. A separate and distinct

adjustments on page 9.

Deductions and Losses not

taxable entity created when an individual

Line 7

Al lowed

debtor fi les for bankruptcy under Chapter 7

Income from Non-Minnesota Sources

Direct expenses should be allocated to the

or 11 of Title 11 of the United States Code.

Enter the total income from sources outside

income to which it is associated. Indirect

If bankruptcy estate is checked, enter the

Minnesota to the extent the amounts are

expenses should be allocated to each class

Bankruptcy debtor’s SSN in the Bankruptcy

included in your federal taxable income. Do

of income in the proportion that each class

debtor SSN box and, if fi ling jointly, enter

not include, however, any income or gains

of income bears to the total income. Only

the second debtor’s SSN in the correspond-

that are being distributed to the benefi ciary.

those expenses that relate to the non-Min-

ing box).

nesota income should be added back on line

Examples of income not subject to Minne-

Composite income tax. If you are paying

2 of Form M2.

sota tax include:

composite income tax for your electing

Deductions not allowed by Minnesota.

• gains from the sale or other disposi tion of

nonresident benefi ciaries, check the box on

Interest and other expenses deducted on

real or tangible property outside Minne-

the front of Form M2 and see the instruc-

your federal return which relate to income

sota,

tions for line 13 on page 5.

or gains from non-Minnesota sources must

• income or gains from the operation of a

ESBT (Electing Small Business Trust). A

be added to your taxable income.

farm outside Minnesota,

non-grantor trust that has income from one

Include administration fees and ex penses,

• profi t from a trade or business out side

or more S corporations. Th e portion of an

interest, taxes, depletion and other deduc-

ESBT that consists of stock of one or more S

Minnesota (enter the name and location of

tions (including the chari table deduction)

the trade or business under line 7),

corporations is treated as a separate trust.

that are connected with or al lowed against

Continued

2014 Minnesota Income Tax For Estates And Trusts (Fiduciary) Form M2 Instructions - Department Of Revenue Page 4

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