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mitch4
New Member

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

I understand I can exclude US Treasury dividend income from my Illinois return. I have the % needed to calculate the US Treasury share. My question is specifically about capital gain distributions.  The Illinois instructions talk about 'distributions from money market trusts (mutual funds)'.  My mutual fund is a stock fund that is 'backed by a portfolio of fixed income instruments.' It partially invests in US government obligations.  It is not called a money market trust.  In fact, I cannot find a definition for money market trust so am assuming it is a generic term but I want to make sure I understand correctly.    Are capital gain distributions, from a mutual fund that partially invests in US government obligations, considered 'distributions from money market trusts (mutual funds) ? And thus can they be excluded on line 22 of my Illinois return?

9 Replies
tagteam
Level 15

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

"Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?"

I suspect you will answer your own question in the negative after reading the language on page 3 of Publication 101 (quoted below the link).

http://www.revenue.state.il.us/publications/pubs/pub-101.pdf

If you receive income from bonds or other obligations that are exempt from Illinois Income Tax, the exempt amount you are entitled to claim is the interest net of bond premium amortization.

mitch4
New Member

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

That comment is also repeated on page 7 of pub 101 (last note).  "The amount of exempt income that you subtract must be reduced by any related bond premium amortization that you deducted federally." But I did not deduct any bond premium amortization.  I'm not sure that you answered my question??  Please comment. Thank you.
mitch4
New Member

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

That comment is also repeated on page 7 of pub 101 (last note).  "The amount of exempt income that you subtract must be reduced by any related bond premium amortization that you deducted federally." But I did not deduct any bond premium amortization.  I'm not sure that you answered my question??  Please comment. Thank you.
mitch4
New Member

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

That comment is also repeated on page 7 of pub 101 (last note).  "The amount of exempt income that you subtract must be reduced by any related bond premium amortization that you deducted federally." But I did not deduct any bond premium amortization.  I'm not sure that you answered my question??  Please comment. Thank you.
mitch4
New Member

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

That comment is also repeated on page 7 of pub 101 (last note).  "The amount of exempt income that you subtract must be reduced by any related bond premium amortization that you deducted federally." But I did not deduct any bond premium amortization.  I'm not sure that you answered my question??  Please comment. Thank you.
mitch4
New Member

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

That comment is also repeated on page 7 of pub 101 (last note).  "The amount of exempt income that you subtract must be reduced by any related bond premium amortization that you deducted federally." But I did not deduct any bond premium amortization.  I'm not sure that you answered my question??  Please comment. Thank you.
tagteam
Level 15

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

In which case, you have nothing to deduct. I was under the impression that you wanted to know whether you can exclude a capital gains distribution from the fund **in addition** to the dividend income passed through to you as a result of the fund receiving interest from U.S. Government obligations and I think it's clear you can't exclude cap gains distributions.
mitch4
New Member

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

First I would like to apologize for the repeated comment; I hit my back button and it posted multiple times.  And that is what i am asking but why is it clear you can't exclude cap gains distributions? Would you please explain.  Thank you.

tagteam
Level 15

Is the US Treasury % of my capital gain distributions exempt from tax in Illinois?

If you receive income from bonds or other obligations that are exempt from Illinois Income Tax, the exempt amount you are entitled to claim is the interest net of bond premium amortization.

That is the exact language from the Publication (quoted in my answer). It says nothing about capital gains distributions being exempt and that actually makes perfect sense; the increase in the value of those exempt bonds has nothing to do with their exempt status.

It's the same on the federal level with respect to municipal bonds; the interest on those bonds is exempt from federal income tax but any gain in value (which is capital gain) is taxable.
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