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Alternative Minimum Tax and Credit Limitations

The gain or loss on property subject to the IRC

Also show on line 22 a statement noting each of

— Residents; Schedule P (540NR), Alternative

Section 179 Recapture should be reported on

the following:

Minimum Tax and Credit Limitations —

Schedule K-1 as supplemental information as

1. Each member’s distributive share of business

Nonresidents or Part-Year Residents; Schedule P

instructed on the federal Form 4797.

income apportioned to an EZ, LAMBRA, MEA,

(541), Alternative Minimum Tax and Credit

The LLC must provide all of the following

or TTA; and

Limitations — Fiduciaries; Schedule P (100),

information with respect to a disposition of

2. Each member’s distributive share of business

Alternative Minimum Tax and Credit Limitations

business property if an IRC section 179 expense

capital gain or loss included in 1 above.

— Corporations; or Schedule P (100W),

deduction was claimed in prior years:

Alternative Minimum Tax and Credit Limitations

Analysis (Schedule K (568) only)

a. Description of the property.

— Water’s-Edge Filers, to determine amounts and

b. Date of the property was acquired.

Line 23a and Line 23b

for other information.

c. Date the property was sold.

See the federal instructions for Schedule K

California law conforms to the existing federal law

d. The members pro-rata share of the gross

(1065), Analysis of Net Income (Loss).

eliminating the deduction for contributions of

sales price.

Tables (Schedule K-1 (568) only)

appreciated property as an item of tax preference.

e. The members pro-rata share of the cost or

As a result, taxpayers no longer need to include in

other basis plus expense of sale (not

Table 1

their computation of Alternative Minimum Taxable

including the entity's basis reduction in the

Enter the member’s share of nonbusiness income

Income the amount by which any allowable

property due to IRC Section 179 expense

from intangibles. Because the source of this

deduction for contributions of appreciated

deduction).

income must be determined at the member level,

property exceeds the taxpayer's adjusted basis in

f. The members pro-rata share of the deprecia-

do not enter income in this category in

the contributed property.

tion allowed or allowable (not including the

column (e). If the income (loss) for an income

For additional information, see instructions for

IRC Section 179 expense deduction).

item is a mixture of income (loss) in different

federal Schedule K (1065), Adjustments and Tax

g. The members pro-rata share of the amount of

subclasses (for example, short-term and long-

Preference Items, line 17a through line 17e. For

IRC 179 expense deduction (if any) passed

term capital gain), attach a supplemental

differences between federal and California law for

through to the member for the property and

statement providing a breakdown of income (loss)

alternative minimum tax (AMT), see R&TC

the LLC's tax year(s) in which the amount was

in each subclass.

Section 17062.

passed through.

Note: Enter nonbusiness income from intangibles

h. An indication if the disposition is from a

Other

in Table 1 net of related expenses. Do not include

casualty or theft.

expenses offset against nonbusiness income from

i. If this is an installment sale, any information

Line 16 through Line 21

intangibles in column (e).

needed to complete form FTB 3805E,

See the instructions for federal Schedule K-1

Table 2

Installment Sale Income. The LLC also must

(1065), “Other,” line 18 through line 20.

The final determination of unity is made at the

separately report the member's pro-rata share

Line 22 (Schedule K)

member level. If the LLC and the member are

of all payments in future tax years. (Install-

The gain on property subject to the IRC Sec-

unitary, or if the LLC is uncertain as to whether it

ment payments received for installment sales

tion 179 Recapture should be reported on the

is unitary with the member, it should furnish the

made in prior tax years should be reported in

Schedule K as supplemental information as

information in Table 2.

the same manner used in prior tax years.)

instructed on the federal Form 4797.

Part A. Enter the member’s distributive share of

Alternative minimum taxable income does not

The LLC must provide all of the following

the LLC’s business income. The member will then

include income, positive and negative adjust-

information with respect to a disposition of

add that income to its own business income and

ments, and preference items attributed to any

business property if a IRC Section 179 expense

apportion the combined business income.

trade or business of a qualified taxpayer who has

deduction was claimed in prior years:

“ Business income” is defined by Cal. Code Regs.,

gross receipts, less returns and allowances,

a. Description of the property.

tit. 18 section 25120(a) as income arising in the

during the taxable year of less than $1,000,000

b. Date of the property was acquired.

regular course of the corporation’s trade or

from all trades or businesses in which the

c. Date the property was sold.

business. Business income includes income from

taxpayer is an owner or has an ownership

d. Gross sales price.

tangible and intangible property if the acquisition,

interest. The LLC should provide the member’s

e. Cost or other basis plus expense of sale

management, and disposition of the property

proportionate interest of aggregate gross receipts

(not including the LLC's basis reduction in

constitutes integral parts of the taxpayer’s regular

on Schedule K-1 (568), line 22. For purposes of

the property due to IRC Section 179

trade or business.

R&TC Section 17062(b)(4), “ aggregate gross

expense deduction).

receipts, less returns and allowances ” means the

Part B. Enter the member’s share of nonbusiness

f. Depreciation allowed or allowable (not

sum of:

income from real and tangible property that is

including the IRC Section 179 expense

located in California. Because this income has a

• The gross receipts of the trades or businesses

deduction).

California source, this income should also be

which the taxpayer owns;

g. Amount of IRC Section 179 expense

included on the appropriate line in column (e).

• The proportionate interest of the gross

deduction (if any) passed through to each

receipts of the trades or businesses which the

member for the property and the LLC's tax

Nonbusiness income is all income other than

taxpayer owns; and

year(s) in which the amount was passed

business income.

• The proportionate interest of the pass-through

through.

Part C. Enter the member’s distributive share of

h. An indication if the disposition is from a

entity’s gross receipts in which the taxpayer

the LLC’s payroll, property, and sales factors.

holds an interest.

casualty or theft.

i. If this is an installment sale, any informa-

“ Aggregate gross receipts ” means the sum of the

tion needed to complete form FTB 3805E,

gross receipts from the production of business

Installment Sale Income.

income, as defined in subdivision (a) of R&TC

Section 25120, and the gross receipts from the

Line 22 (Schedule K-1 (568) only)

production of nonbusiness income, as defined in

The LLC may need to report supplemental

subdivision (d) of R&TC Section 25120. For

information that is not specifically requested on

purposes of this section, “ pass-through entity ”

the Schedule K-1 (568) separately to each

means a partnership (as defined by R&TC

member.

Section 17008), an S corporation, a regulated

Members may need to obtain the amount of their

investment company (RIC), a real estate

proportionate interest of aggregate gross

investment trust (REIT) and a REMIC. See R&TC

receipts, less returns and allowances, from the

Section 17062 for more information.

LLC.

Page 16 Form 568 Booklet 2005

Instructions For Form 568 - Limited Liability Company Return Of Income - State Of California Franchise Tax Board - 2005 Page 16

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