Form Sc1065 - Instructions Sheet For South Carolina Partnership Return printable pdf download

INSTRUCTIONS FOR SC1065 - SOUTH CAROLINA PARTNERSHIP RETURN (Rev. 1/31/02)

NEW INFORMATION 2001

South Carolina has updated income tax laws to conform with the Internal Revenue Code of 1986, as amended through

December 31, 2000, including the effective dates, with the modifications as explained in the instructions.

The SC1065 has several changes this year. The front page of the form has been reorganized. Please check the appropriate

boxes at the top of the form. If this is the first return to be filed in South Carolina, mark the Initial Return box. If this is the last

return to be filed in South Carolina, mark the Final Return box. If the address of the partnership has changed since last year's

return was filed, mark the Change of Address box. If the partnership can obtain forms from other sources and does not need the

SC Department of Revenue to mail forms next year, mark the Forms Not Needed Next Year box.

A new line number, line 12, has been added to the return to claim payments made with the SC4868 extension request. Line 13

now shows the balance due to be paid with the SC1065.

The Non-Refundable Tax Credits that previously appeared on page two of the SC1065 now should be reported on the

SC1040TC form (formerly Schedule TC). The completed SC1040TC should be attached to the SC1065.

REMINDERS

Partnerships who pay withholding on income of partners who are nonresidents of South Carolina must provide the nonresident

partners a federal form 1099-MISC with "SC only" written at the top showing the respective amounts of income tax withheld.

This is a requirement for the partnership per SC Code Section 12-8-1540. This is not an option.

An amended SC1065 return must be filed when the Internal Revenue Service adjusts your federal 1065 return.

Limited Liability Companies must file Secretary of State annual reports. This form must be filed with the South Carolina

Secretary of State's office per SC Code of Laws section 33-44-211. Visit or call 803-734-2158 for more

information or forms.

LIABILITY FOR RETURNS

Every partnership, whether domestic or foreign, doing business or owning property in South Carolina must make a return of income on

this form. The income or loss of a partnership shall be computed in the same manner and on the same basis as in the case of an

individual. Taxpayers carrying on business in a partnership shall be liable for income tax only in their individual capacity, and each

partner shall include in his return his distributive share, whether distributed or not, of the net income or loss of the partnership for the

taxable year. If the taxable year of a partner is different from that of the partnership, the amount so included shall be based upon the

partnership income of the year ending within the taxpayer's taxable year.

COMPUTATION OF INCOME

Line 1 - Line 1 is the total of federal Schedule K lines 1 through 7 income (loss) amounts. This is necessary to make the

partnership income tax return consistent with the requirement to pay withholding tax on income of nonresident partners. See line 10

and Schedule WH.

Note: Generally all income (loss) amounts are considered business related and subject to apportionment by multi-state partnerships.

See instructions after line 3 for exceptions related to dividend income, real estate gains, and guaranteed payments.

Line 2 - SOUTH CAROLINA ADDITIONS TO INCOME (See note.) Add any income taxed by South Carolina but not taxed by the U.S.

government such as interest income received from states other than South Carolina, or their political subdivisions.

Add any expense deducted on the federal return related to any income exempt or not taxable by South Carolina.

Effective June 21, 1993, nonresident sellers of South Carolina real property and associated tangible personal property that elect out of

installment sales treatment for state income tax purposes pursuant to Section 12-9-510 will have an addition to federal income in the

year of sale so as to include the entire gain in South Carolina taxable income.

Line 3 - SOUTH CAROLINA SUBTRACTIONS FROM INCOME (See note.) Deduct any income not taxed by South Carolina that is

taxed by the U.S. such as interest paid by the U.S. government on U.S. savings bonds, Treasury bills, etc.

As of 1985, depreciation expense is equal to federal depreciation expense. Any adjustment to depreciation due to prior differences in

law will occur at the end of the federal depreciation period. The balance of personal property basis will be depreciated at the rate of

50% per year; real property basis at the rate of 20% per year. Depreciation cannot exceed the basis of an asset!

Federal election to reduce basis due to federal investment credit will result in ordinary expense of the amount of the

reduction in basis. This reduction in basis is a deduction from income.

Note:

The following items may be an addition to income or a deduction depending upon how a particular item was

reported or deducted:

change in accounting method

installment method of reporting income

federal gain or loss due to difference in basis because of state tax law prior to 1985

Form Sc1065 - Instructions Sheet For South Carolina Partnership Return

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