To take advantage of the Bailey Exemption you need to confirm that the NC distribution amount on the 1099-R is not empty. It should be the amount in box 2a, or the taxable amount in Box 1 if Box 2a is empty or undetermined. If the NC distribution amount is blank or zero, there is nothing to subtract from North Carolina income.
Go back to the "Income" tab and "Edit" the 1099R. After confirming the form entries, there will be a follow on question for NC residents that asks if the distribution is part of the Bailey Settlement. You would need to select "Yes."
After completing the Federal Interview return to the NC state interview. Click through the initial pages and you will arrive at the page titled "Here's the income NC handles differently." The Bailey deduction should show at the top of that page with a button allowing you to edit if needed.
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