Investors & landlords

I did some further research on this question. From an aztax-aide.org posting (https://aztax-aide.org/wp-content/uploads/2020/11/Net-Long-Term-Gain-2020-11-16.pdf?6cc19a&6cc19a) I found that Short Term transactions (gains?) nor dividend distributions are not to be included. Don't know if this would also include reinvested dividends - if so, this becomes a much more difficult computation.

Here is the relevant text from the posting:

"Arizona provides a reduction of 25% of the net Long-Term Capital Gains received from assets
acquired after 12/31/2011 and included in the Federal Adjusted Gross Income (AGI). This credit
is shown on page 1, line 23 of AZ-140.

There is no reduction necessary if the Net Capital Gain for assets acquired after 12/31/2011 is a
loss reported as a reduction of Federal Adjusted Gross Income.

To calculate the Net Long Term Capital Gain, you must review the taxpayers broker statement
detail of Long-Term transactions and net the Gains against the Losses. Only include transactions
where the acquisition date can be verified on the brokers statement.

Do not include Short Term transactions nor Dividend distributions. Neither are subject to the
25% reduction. For assets acquired by Gift or Inheritance, the acquisition date is the date the
asset was acquired by the original owner."

 

I then saw a posting in the Bogelheads forum (https://www.bogleheads.org/forum/viewtopic.php?t=205727) - search for "December" - there will be 6 occurrences - go to the last 2 occurrences for the post of interest:

 

"Note that AZ offers a subtraction of 25% of the LTCGs generated on shares purchased after 12/31/2011. For example, if you hold a fund which was purchased after that date or to which you added shares after that date from reinvested divs and cap gains, you can subtract 25% of the cap gains paid out on those shares whether it is from a cap gain distribution or a redemption. From the AZ Form 140 Inst:
You may subtract 25% (.25) of any net long-term capital gain included in your federal adjusted gross income that is derived from an investment in an asset acquired after December 31, 2011. Use the worksheet on page 29 of these instructions, Worksheet for Net Long-Term Capital Gain Subtraction for Assets Acquired after December 31, 2011, to determine the allowable subtraction. Keep the worksheet for your records.
Assume you have a fund for which reports 8000 of cap gains or your sale produces a LT cap gain of 8000. Half the shares were purchased prior to 2012 and half after that date. Therefore 4000 of your cap gains are eligible for subtraction. 25% of 4000 = 1,000. which shows as a subtraction on your AZ 140. Effectively, this reduces the rate you pay on these gains by 25% regardless of which marginal bracket you are in. If it is the 4% bracket, then you actual rate becomes 3%."

I had found an older (I think 2016) AZ tax form (perhaps 140PY?) that had instructions & guidance on this (can't find the document anymore) - it specifically said that in the case of mutual funds, where the specific shares being sold/bought could not be determined, they could not be claimed for this LT Cap Gain reduction.

I decided to enter zero in my tax form as it is the safest option.