Why is TT forcing a 100% income allocation to Michigan on MI-4797 even when I say it is derived in another state?

[annieland]

In entering the sale of a rental property in NY, and reporting it on my Nonresident NY return, my Michigan Resident return walk-through allows me to change the gains it pre-fills for MI to $0, but when it prints the MI-4797 form it keeps 100% on all the lines in the boxes for line 19.  I've NEVER tried to override anything in TT in my 25 years using it so I don't want to start now.  Everything else should be correct as I've spent the last year making sure every asset has been properly depreciated, pro-rated, and gain reported across 3 returns. 

Here's a screenshot of what I'm talking about.  If this is just TT behavior that won't cause me any issues with filing I can stop driving myself crazy reading every MI tax code available trying to find where I went wrong and coming up empty.  Thank you!

@TomD8 🙂

[RobertB4444]

As long as it applies $0 as the taxable amount in Michigan then you don't mind paying 100% of that.  Should be just fine.

@annieland 

[annieland]

Thanks, Robert!  Yesterday, @AmyC replied to my original longer post (with background) advising me that my MI-4797 looks totally incorrect and that should all be taxable to MI and then I'll get a credit for NY.  My problem is I don't think I owe tax to NY on my capital gains because they are offset by all my suspended losses now being realized as all my rental income and property tax and other expenses were allocated to NY for the past 5 years.

If I don't add that suspended loss on ordinary federal income back to my Michigan AGI on MI Schedule 1 I end up with much less Michigan tax owed and it just doesn't seem right to me.  I have read the entire Michigan Tax Code chapter 206, instructions for all relevant MI forms, and the MI Treasury guide for professional tax preparers and still can't figure out if the suspended loss claimed against Fed AGI should be claimed against both MI and NY when the property sale was entirely in NY.  Even though it is a "business asset disposition" this is not a qualified trade or business as MI defines it.  I'll just keep reading because I'm still not confident.

[annieland]

Also to add, I have multiple times across all my draft returns completely removed the MI return and redone NY first.  I still get the same results from MI (depending on what I change to 0 after TurboTax pre-fills all the asset disposition and recapture to Michigan).