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Line 12—Enter Social Security and Social Security equivalent

Line 18—Enter Kentucky domestic productions activities

U.S. Railroad Retirement Board benefits included on Form

deduction. Beginning on or after January 1, 2010 limit the

740, page 1, Line 5. These amounts are reported on federal

federal domestic productions activity by the six percent (6%)

Form 1040, Line 20(b) (Form 1040A, Line 14(b)).

in lieu of the rate provided by IRC§ 199(a).

Line 19—Enter other subtractions from federal adjusted

Line 13, Long–term Care Insurance Premiums—Enter long–

gross income not listed above (attach detailed schedule).

term care insurance premiums paid in 2011. Do not claim as

Include:

an itemized deduction.

• income of active duty military pay;

Line 14, Health Insurance Premiums—Enter medical and

• income received from the tobacco quota buyout;

dental insurance premiums paid for yourself, your spouse

• income received as a result of the Master Tobacco Settlement

and your dependents. This deduction applies to premiums

Agreement, the secondary settlement fund referred to as

paid with after-tax dollars. Note: You cannot deduct on Line 14

“Phase II”;

• income received from the Tobacco Loss Assistance

insurance premiums paid with pretax dollars (cafeteria plans

Program (TLAP);

and vouchers already excluded from wage income) because

• income of precinct workers for election training or working

the premiums are not included in box 1 of your W-2 form(s).

at election booths;

Do not include long-term care insurance premiums included

• capital gains on property taken by eminent domain;

on Schedule M, Line 13. You may not deduct premiums paid

• passive activity loss adjustment (see Form 8582-K and

on your behalf (advance payments) and you must reduce

instructions);

the amount you paid by the amount of health coverage tax

• income of a child reported on the parent’s return;

credit. (See federal Form 8885.)

• artistic charitable contributions (if you do not itemize

deductions);

Line 15—Enter resident adjustment from Kentucky Schedule

• the federal work opportunity credit used to reduce wages;

K-1. Partners, beneficiaries of estates and trusts and S

• at-risk limitations (see instructions below);

corporation shareholders, see Kentucky Schedule K-1

• qualified farm networking project differences per KRS

141.0101(15);

instructions. Subtract the distributive share of net income

• differences in the gains (losses) from the sale of intangible

from an S corporation subject to the franchise tax imposed

assets amortized under the provisions of the Revenue

under KRS 136.505 or the capital stock tax imposed under

Reconciliation Act of 1993;

KRS 136.300.

• differences in gains (losses) from assets purchased after

September 10, 2001; and

Line 16—Depreciation, Section 179 Deduction and Gains/

• income of military personnel killed in the line of duty.

Losses From Disposition of Assets—Important: Use

Schedule M, Lines 4 and 16 only if you have elected for federal

Note: All income earned by soldiers killed in the line of duty

income tax purposes to take the 30 percent or the 50 percent

is exempt from Kentucky tax for the year during which the

special depreciation allowance or the increased Section 179

death occurred and the year preceding the death. Federal and

deduction for property placed in service after September

state death benefits payable to the estate or any beneficiaries

10, 2001. A copy of the federal Form 4562 if filed for federal

may also be excluded. Additional information may be found

income tax purposes must be submitted with Form 740 to

in the General Information section of the instructions for

verify that no adjustments are required.

Form 740.

Determining and Reporting Differences in Gain or Loss

Reporting Depreciation and Section 179 Deduction Differences

From Disposition of Assets—If during the year you dispose

for Property Placed in Service After September 10, 2001

of assets placed in service after September 10, 2001, on

Create a Kentucky Form 4562 by entering Kentucky at the

which the 30 percent or the 50 percent special depreciation

top center of a federal Form 4562 above Depreciation and

allowance or the increased Section 179 deduction was taken

Amortization. In Part I replace the $250,000 maximum amount

for federal income tax purposes, you will need to determine

on Line 1 with the Kentucky limit of $25,000 and replace the

and report the difference in the amount of gain or loss on

$800,000 threshold amount on Line 3 with the Kentucky

the assets as follows:

phase-out threshold of $200,000. In Part II, strike through and

Create a Kentucky form by entering Kentucky at the top

ignore Line 14, Special depreciation allowance for qualified

center of a federal Schedule D, federal Form 4797 and other

property placed in service during the tax year.

applicable federal forms. Compute Kentucky gain or loss

Use the created Kentucky Form 4562 to compute Kentucky

from the disposed assets using the Kentucky basis. Enter the

depreciation and Section 179 deduction in accordance with

difference in federal gain or loss and the Kentucky gain or loss

the IRC in effect on December 31, 2001. Note: In determining

on the appropriate line. Attach the created Kentucky Schedule

the Section 179 deduction for Kentucky the income limitation

D, Kentucky Form 4797 and other forms or schedules to

on Line 11 is Kentucky net income before the Section 179

support the deduction.

deduction instead of federal taxable income. Attach the

At-Risk Limitations—Federal/Kentucky income (loss)

created Kentucky Form 4562 to Form 740 and enter the

differences may create different allowable losses due to

amount of Kentucky depreciation from Line 22 on Line 16.

at-risk limitations. If you have amounts invested in an

Line 17—Enter Kentucky net operating loss calculated from

activity for which you are not at risk and used federal Form

prior years. Keep worksheet detailing the net operating loss

6198, At-Risk Limitations, complete federal Form 6198 using

claimed with your records.

Kentucky amounts to determine if the Kentucky allowable loss

differs from the federal allowable loss. For a passive activity,

Note: If your net operating loss occurred in 2011, complete

use the Kentucky allowable loss to complete Form 8582-K.

Kentucky Schedule KNOL to determine the amount of

For all other activities (nonpassive), enter the difference as an

your loss to be carried forward in future years. Any

“other addition” or “other subtraction” on Line 7 or Line 19.

carry forward of a prior year loss claimed on Line 17 of

Schedule M should be calculated using a worksheet. Keep

Line 20, Total Subtractions—Add Lines 9 through 19. Enter

a copy for your records and attach a copy to your return.

on Line 20 and on Form 740, page 1, Line 8.

Instructions For Forms 740 And 740-Ez - Kentucky Individual Income Tax Return - 2011 Page 19

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