M1AR: Accelerated Recognition of Installment Sale Gains (2025)
Minnesota · Minnesota DOR · Used for tax years 2025
Minnesota Schedule M1AR calculates accelerated recognition of installment sale gains from sales of S corporation stock, partnership interests, or assets of either entity. It also lets you elect to defer the gains and agree to report them on future Minnesota income tax returns.
Who files this form
Use 2025 Schedule M1AR to report installment sale income from the sale of S corporation stock, a partnership interest, or assets of an S corporation or partnership. This also includes income passed through to you by an S corporation, partnership, or trust reporting such a sale.
Complete the schedule if 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.
Do not complete this schedule if you are a full-year Minnesota resident. It is also not required for an installment sale of property unrelated to the sale of an S corporation or partnership, or if you accelerated the gains from that sale in a prior year.
What you'll need
Have the applicable forms and information ready:
- Federal Form 6252, if you reported or should have reported the sale on that form with your federal individual income tax return.
- Minnesota Schedule KS, KPI, or KF, if an S corporation, partnership, or trust reported the installment sale income to you.
- Gross profit information from the year of sale and installment sale income for the current year.
- Records of installment sale gains received in 2017 through 2024, plus any amount previously taxed by Minnesota.
- Your identifying information, the final year of the installment agreement, and the business's name, FEIN, and Minnesota tax ID number.
If you were a nonresident at the time of sale, you also need the business's apportionment percentage for that year and any information needed to allocate nonbusiness income. If you use multiple allocation methods, include an explanation with your return showing how you calculated and applied the percentages to the separate parts of the purchase price.
How to file
If you elect to defer the gains: Make the election on Schedule M1AR and stop without completing the remaining lines. Submit the form to verify your election. You agree to file Minnesota income tax returns in subsequent years when the gains are recognized, allocate the gains as though realized in the year of sale, and include all relevant federal installment sale tax documents with those returns.
If you do not elect to defer: Complete lines 1 through 5 and include line 5 on Schedule M1MB, line 6.
- If you were a Minnesota resident at the time of sale, also include that amount on Schedule M1NR, line 13, Column B, and stop.
- If you were a nonresident at the time of sale, complete lines 6 through 12. Include line 12 on Schedule M1NR, line 13, Column B.
The supplied text does not give a mailing address or e-file directions.
Common mistakes
- Completing the schedule as a full-year Minnesota resident. The form says not to do so.
- Continuing past the deferral election. If you elect to defer, stop there and submit the form to verify the election.
- Skipping the schedule because the gain is undetermined. You must still complete and file it, including for a contingent payment sale with no stated maximum selling price.
- Leaving previously taxed amounts out of line 2. Include gains received in 2017 through 2024 and any amount previously taxed by Minnesota.
- Using the wrong percentage format. Enter lines 6 and 7 as decimals carried to five decimal places.
- Omitting allocation details. If you use multiple nonbusiness allocation methods, include the required explanation with your return.
Questions people ask
Do I need Schedule M1AR every year?
The instructions say to complete it for each year you have an installment gain to report. They also say it is not required if you accelerated the gains from that sale in a prior year.
What if the final selling price is not known?
Complete and file the schedule even if the installment sale income is undetermined. This includes a sale with no stated maximum selling price, such as a contingent payment sale.
Where do I find the apportionment percentage for line 6?
Use the percentage for the year of sale from Schedule KS, line 50; Schedule KPI, line 52; or Schedule KF, line 6c. Enter it as a decimal carried to five decimal places.
Where can I get help?
Visit www.revenue.state.mn.us, email businessincome.tax@state.mn.us, or call 651-556-3075.