Thank you SO much for replying. If I do it your way I get a big refund from MI based on my much lower Federal AGI because of the suspended loss offsetting gains and reducing ordinary taxable income. Because of that I have no tax liability in NY for MI to credit me for, or otherwise.
Perhaps my error is that on the MI Schedule 1 I have my recaptured loss (123k) in the 2nd line in the box and on Line 4 because it is a deduction to my Fed AGI due to a property sale located entirely out of state and I am a full-year MI resident. The MI tax preparer instructions state: "A Michigan resident may subtract from AGI income that is not allocated or apportioned to Michigan. Conversely, losses not allocated or apportioned to Michigan must be added to AGI." But I am not a business because this is not considered MI business income because it doesn't "constitute[s] integral parts of the person's regular trade or business operations."
Therefore on my Schedule 1 I added back the $123k loss and then subtracted the $76k gain because every MI tax code and preparer manual I read says income from a sale of a property out of state should not be allocated to Michigan unless it's business income and I'm not a business. Perhaps it is because that box on the Sch 1 is for business income I shouldn't put it there even though it is a loss out of state? I feel like it's wrong to take advantage of the big reduction in Federal AGI in MI when that's the whole reason we have the list of required MI additions to income.
So then you're saying my Michigan AGI should match my Federal with no reference to a loss from another state and my Sch 1 should only show the NY gain added and then subtracted netting $0 and AGI unchanged. If that's the case, I'm getting a lot of W-2 withholdings back from MI which makes me nervous.
