Each year's return should be completed in itself and taxpayer's are expected to make every reasonable effort to ascertain the facts necessary to make a correct return. The expenses of one year can not be used to reduce the income of a subsequent year. A taxpayer has the right to deduct all authorized allowances, and it follows that if he does not within any year deduct certain of his expenses, losses, interest, taxes or other charges, he can not deduct them from the income of the next or any succeeding year. It is recognized, however, that particularly in a going business of any magnitude, there are certain overlapping items of both income and deductions, and so long as these overlapping items do not materially distort the income they may be included in the year in which the taxpayer, pursuant to a consistent policy, takes them into his accounts. Judgements[sic] or other binding adjudications, such as decisions of referees and boards of review under workman's compensation laws, on account of damages for patent infringement, personal injuries, or other causes, are deductible from gross income when the claim is so adjudicated or paid, unless taken under other methods of accounting which clearly reflects, the correct deduction, less any amount of such damages as may have been compensated for by insurance or otherwise. If, subsequent to its occurrence, however, a taxpayer first ascertains the amount of a loss sustained during a prior taxable year which has not been deducted from gross income, he may render an amended return for such preceding taxable year including such amount of loss in the deductions from gross income and may file a claim for refund of the excess tax paid by reason of the failure to deduct such loss on the original return. A loss from theft or embezzlement occurring in one year and discovered in another year is ordinarily deductible for the year in which sustained.

A long-term intergenerational trust is a trust established for an individual under the age of 18. The purpose of the trust is to provide tax-deferred growth of funds for the minor's retirement. The trustee must be a resident of Arkansas and cannot distribute any of the trust's funds to the beneficiary until the beneficiary reaches the age of 55. Up to $4,000.00 per year can be contributed to the trust.

Contributions to the trust are taken as an adjustment (that is, subtracted) from the contributor's gross income for purposes of calculating the contributor's adjusted gross income.

Income tax on trust earnings is deferred until such time that the earnings are distributed to the trust's beneficiaries.

*All distributions from the trust, whether principal, earnings or a combination thereof, are taxable to the beneficiary who receives them. Prior to August 1, 1997, distributions of trust principal were not taxable, while distributions of trust earnings were taxable.

Under certain circumstances, as set forth below in Income Tax Regulation 1977-5, the income of residents of Texarkana, Arkansas and Texarkana, Texas, which would normally be subject to Arkansas income tax, will be exempt from Arkansas income tax due to Arkansas' “border city tax exemption” as established by ACA 26-52-602.

The Commissioner of Revenues of the State of Arkansas, pursuant to the authority vested in him by Act 118 of 1929, and Act 132 of 1965, with the approval of the Governor, does hereby promulgate the following regulations and rules for the orderly administration of Act 48 of 1977, as amended by Act 177 of 1977.

Definitions. The following words shall have, when used in this regulation, the following meaning:

The effective date of this regulation shall be January 1, 1978.

* Withholding forms associated with this exemption are: