Mich. Admin. Code R 206.12 — Allocation and apportionment of income; adjustments

Rule 12. (1) Salaries, wages, and othe r compensation received by a Michigan
resident are allocated to Michigan. The cr edit provided in section 255 of Act No. 281 of
the Public Acts of 1967, being §206.255 of the Michigan Compiled Laws, may be
claimed if the compensation was earned in another state and taxed by that state.
(2) Salaries and wages earned in Mi chigan by a nonresident are allocated to
Michigan.
(3) Income from a trade or business as defined in R 206.1 is allocated or
apportioned to the state in which the activity takes place.
(4) Business income that is attributable to Michigan and 1 or more other states
shall be apportioned as provided in sections 115 to 195 of Act No. 281 of the Public Acts
of 1967, as amended, being §§206.115 to 206.195 of the Michigan Compiled Laws.
(5) Net rents and royalties from real propert y are allocated to the state in which the
real property is located.
(6) Net rents and royalties from tangibl e property are allocated to Michigan, if
either of the following provisions applies:
(a) The personal property is utilized in Michigan.
(b) The rent is received by a Michigan reside nt or the recipien t has a commercial
domicile in Michigan and is not organized under the laws of, or subject to tax by, the
state in which the property was utilized.
(7) Capital gains and losses from the dispos ition of real property are allocated to
the state in which the real property is located.
(8) Capital gains and losses from the dispos ition of personal prop erty are allocated
to Michigan if any of the following provisions apply:
(a) The property was located in Michigan at the time of sale.
(b) The taxpayer is a Michigan resident.
(c) The taxpayer has a commercial domicile in this state and is not taxable in the
state in which the property had a situs.
(9) Capital gains and losses from the dis position of intangible personal property
are allocated to Michigan if received by a Michigan resident.
(10) Interest, dividends, and pension and a nnuity income are allocated to Michigan
if received by a Michigan resident.
(11) Patent and copyright royalties are allocated to Mi chigan if either of the
following provisions applies:
(a) The patent or copyright is used in Michigan.
(b) The owner is a Michigan resident or has a commercial domicile in Michigan
and is not taxable in the state in which the patent or copyright was used.

(12) A patent is used in Michigan if the patented product is produced in Michigan
or the patent is used in Michigan production, fa brication, manufacturing, or other
processing.
(13) A copyright is used in Michigan if the printing or publication of the
copyrighted item takes place in Michigan.
(14) Income includable in federal adjusted gross income not specifically allocated
or apportioned by this rule is allocated to Michigan when received by a Michigan
resident. Credit for tax paid to another state on inco me subject to tax in the other
state may be claimed by the Michigan resident.
(15) The following forms of income may be claimed as a subtraction from
adjusted gross income if not allocated or apportioned to Michigan; conversely,
losses not allocated or apportioned to Michigan shall be added to adjusted gross income:
(a) Trade or business, including farming.
(b) Rents and royalties from real and personal property.
(c) Capital gains from the disposition of real and tangible personal property.
(d) Capital gains from the disposition of intangible personal property.
(e) Interest and dividends.
(f) Pensions and annuities.
(g) Patent and copyright royalties.
(16) Distributive share items received by a partner are a llocated or apportioned
as follows:
(a) Ordinary income is apportione d to Michigan by the partnership
apportionment factors provided in sections 115 to 195 of Act No. 281 of the Public Acts
of 1967, as amended, being §§206.115 to 206.195 of the Michigan Compiled Laws.
(b) Salary allocated to Michigan when received by a Michigan resident. Credit
may be claimed for tax paid to another state if the salary was earned in the other state.
Salary earned in Michigan by a nonresident partner is allocated to Michigan.
(c) Short-term capital gains (losses), long- term capital gains (losses), involuntary
conversion gains (losses), and other gains (losses) from real or personal property that had
a situs in Michigan at the time of sale are allocated to Michigan. Capital gains from
the sale of intangible personal property are al located to Michigan when received by a
Michigan resident.
(d) Additional first-year depreciation on property located in Michigan is allocated
to Michigan.
(e) Distributive items from a partnership no t allocated or apportio ned to Michigan
may be claimed as a deduction from ad justed gross income. Conversely, losses and
deductions not allocated or apportioned to Michigan shall be added to adjusted gross
income.
(17) All distributive inco me from a subchapter S corporation includable in the
shareholder's adjusted gross income is subject to tax if allocated or apportioned to
Michigan.
(18) Dividend distributions taxable as or dinary income, plus undistributed income
taxable as ordinary income, are apportioned to Michigan if all of the corporation's
business activities are confined to Mich igan. If the cor poration is taxable both
within and without Michigan, such inco me is apportioned to Michigan as provided in

sections 115 to 195 of Act No. 281 of th e Public Acts of 1967, as amended, being
§§206.115 to 206.195 of the Michigan Compiled Laws.
(19) Dividend distributions taxabl e as long-term capital gains and
undistributed long-term capital gains are allocated as follows:
(a) Capital gains from the disposition of r eal property are allocated to Michigan if
the property is located in Michigan.
(b) Capital gains from the disposition of tangible personal property are allocated to
Michigan if the property has a situs in Michigan at the time of sale.
(c) Capital gains from the sale of intangible personal prope rty are allocated to
Michigan when received by a Michigan resident.
(20) Distributive income from a subcha pter S corporation not allocated or
apportioned to Michigan may be claimed as a subtraction from adju sted gross income.
Conversely, losses not allocated or apportioned to Michigan shall be added to adjusted
gross income.