Nh-1040 Instructions - Proprietorship Business Profits Tax Return (Page 3 of 4) in pdf

New Hampshire

2015

PROPRIETORSHIP

BUSINESS PROFITS

Department of

NH-1040

TAX RETURN

Revenue Administration

INSTRUCTIONS - continued

LINE 6(a) Deduct interest or dividend income that is subject to taxation under RSA 77. Deduct the amount of the interest and dividends reported on

the Interest and Dividends Tax return (Form DP-10) on this line.

LINE 6(b) Deduct interest income resulting from investments in direct United States obligations, net of expenses, on this line.

Federal obligations are exempt from tax by states or their political subdivisions when obligations are issued to secure credit to carry on the

necessary functions of government. Exempt U.S. Government interest claimed as a deduction must be reduced by the following expenses if the

expenses were claimed as deductions in arriving at your federal taxable income:

• interest on money borrowed to purchase or carry the bonds or securities; and

• ordinary and necessary expenses paid or incurred in connection with producing exempt income.

These expenses may also be added back on Line 6(f), do not add back twice.

LINE 6(c) Deduct reasonable compensation for personal services performed by a proprietor, partner, or member for the business organization. A

partnership or proprietorship whose partner(s), or proprietor perform services for the business organization may take a reasonable compensation

deduction on the business organization's Business Profits Tax Return for that service. If the compensation deduction exceeds $75,000, then the

business organization must maintain business records to demonstrate that the deduction is reasonable.

If a business organization was unable to take a reasonable compensation deduction in a prior year(s) due to insufficient business profits, the

business organization may adjust this year's compensation deduction to reflect the under-compensation in the prior year(s). However, the business

organization must maintain records sufficient to demonstrate that intention.

The amount of the deduction cannot reduce taxable business profits to less than zero.

Reasonable compensation may also include an amount up to 15% of the gross selling price of a business asset. This amount must represent a

commission attributable to the efforts of a partner or proprietor to sell that asset.

LINE 6(d) Add income taxes, franchise taxes, or capital stock taxes taken as deductions on the Federal Return for any state or political subdivision, or

foreign taxes based on or measured by net income.

The Business Enterprise Tax (BET) is not based on or measured by net income and is not added back. Business Profits Tax (BPT) is based on net

income and must be added back if a deduction for BPT has been taken on your Federal Return.

LINE 6(e) Deduct wage adjustment required by IRC §280C. Deduct the wages or salaries paid or incurred for the taxable year which is equal to the

sum of the credits determined for the taxable year under IRC §45A(a), §51(a), §1396(a), §1400P(b), and §1400R.

LINE 6(f) Add expenses related to constitutionally exempt income. Expenses that are incurred to produce income that is constitutionally exempt

from taxation in New Hampshire must be added back to gross business profits. These expenses include such items as interest expense and other

expenses incurred to earn interest from investments in direct U.S. obligations. This add back also includes expenses related to the production of

non-unitary income not included on this return.

LINE 6(g). A deduction is allowed for the contribution of scientific equipment or apparatus to an educational organization or institute of higher

education equal to the sum of the taxpayer's basis in the contributed property plus 50 percent of the unrealized appreciation, or twice the basis of

the property, whichever is less.

LINE 6(h) Deduct the allowable net operating loss carry forward from a prior year on this line. Use Form DP-132 to calculate this deduction.

The Net Operating Loss Deduction (NOLD) must be apportioned to determine the amount of the carry forward based on the apportionment

determined on the Form DP-80. Form DP-132 must be attached for this deduction. You must report the NOLD available and the amount of NOLD to

be carried forward.

LINE 6(i) Add Qualified Investment Company (“QIC”) holder's proportional share of QIC profits on this line. A business organization which holds an

interest in a QIC must add to gross business profits its share of the QIC profits for the year, losses are not deducted. If the QIC makes a distribution,

do not include the distribution in gross business profits of the interest holder.

LINE 6(j) Net Lines 6(a) through 6(i).

NH-1040 Instructions 2015

Page 3 of 4

Version 1.3 02/2016