M1AR: Accelerated Recognition of Installment Sale Gains (2024)
Minnesota · Minnesota DOR · Used for tax years 2024
Minnesota Schedule M1AR calculates accelerated installment sale gains from sales of interests in, or assets of, an S corporation or partnership and the amount allocated to Minnesota. It also allows you to elect to defer installment sale gains and agree to report them on future Mi
Who files this form
Complete 2024 Schedule M1AR if you report installment sale income from S corporation stock, a partnership interest, or assets of an S corporation or partnership, and all of these apply:
- The sale was executed after December 31, 2016.
- You were a nonresident or become a nonresident while recognizing the installment sale gains.
- The S corporation or partnership had a Minnesota filing requirement, or you were a Minnesota resident, in the year of sale.
This also applies if you receive income through an S corporation, partnership, or trust reporting such a sale. Complete a Schedule M1AR for each year you have an installment gain to report.
Do not complete this schedule if you are a full-year Minnesota resident. It is also not required for installment sales of property unrelated to the sale of an S corporation or partnership, or if you accelerated the gains from the sale in a prior year.
What you'll need
Have the following information ready, as applicable:
- Federal Form 6252: Use information from this form if you reported, or should have reported, the installment sale on your federal individual income tax return.
- Minnesota Schedule KS, KPI, or KF: Use the schedule provided to you if you own an interest in an S corporation, partnership, or trust that completed the sale.
- Prior-year gain information: For line 2, gather installment sale gains received in 2017 through 2023 for the sale, plus any amount previously taxed by Minnesota.
- Business and personal details: The form asks for your name, Social Security number, mailing address, the final year of the installment agreement, and the S corporation’s or partnership’s name, FEIN, and Minnesota tax ID number.
- Allocation information, if applicable: You may need the entity’s apportionment percentage for the year of sale and information to calculate nonbusiness income allocation. If you use multiple allocation methods, include an explanation with your return showing how you applied the percentages to the separate parts of the purchase price.
Common mistakes
- Completing the schedule as a full-year Minnesota resident. The form specifically says not to do this.
- Continuing the calculations after electing to defer. If you elect to defer, stop at the election and submit the form to verify your election.
- Skipping the schedule because the gain is unknown. Complete and file it even if installment sale income is undetermined, including a sale with no stated maximum selling price.
- Continuing past line 5 when you were a resident at the time of sale. Include line 5 on Schedule M1MB, line 6, and Schedule M1NR, line 13, Column B, then stop.
- Using the wrong format for allocation percentages. Enter lines 6 and 7 as decimals carried to five decimal places.
- Leaving out the explanation for multiple nonbusiness allocation methods. Include the additional calculation and allocation information with your return.
Questions people ask
Can I elect to defer installment sale gains?
Yes. The form provides an election under Minnesota Statute 290.0137, paragraph (b). You agree to file Minnesota income tax returns in subsequent years when the gains are recognized, allocate the gains to Minnesota as though realized in the year of sale, and include all relevant federal tax documents reporting the sale with subsequent Minnesota returns.
What if the installment sale income is not yet known?
You must still complete and file Schedule M1AR. This includes contingent payment sales with no stated maximum selling price.
What goes on line 2 for 2024?
Include installment sale gains received in 2017 through 2023 for the sale reported on Schedule KPI, KS, KF, and federal Form 6252. Also include any amount previously taxed by Minnesota.
Where can I get help?
Visit www.revenue.state.mn.us, email businessincome.tax@state.mn.us, or call 651-556-3075.