Instructions For 2008 Schedule Rt - State Of Wisconsin (Page 3 of 12) in pdf

Wisconsin Schedule RT Instructions

Page 3

• A fiduciary of a trust and a beneficiary of an-

be deductible under section 163 of the Internal

Revenue Code and otherwise deductible in the

other trust, if the same person is a grantor of

computation of Wisconsin income.

both trusts.

• A fiduciary of a trust and a corporation more

Expenses that are deductible as “interest ex-

than 50% of the value of which is owned (di-

penses” under section 163, IRC, may include:

rectly or indirectly), by or for the trust or the

• All interest paid or accrued within the taxable

grantor of the trust.

year on indebtedness.

• A person and an exempt organization under

• Original issue discount.

sec. 501, IRC, which is controlled directly or

indirectly by the person or (if the person is an

• Nonseparately stated interest included in car-

individual) the person’s family.

rying charges for installment purchases.

• A corporation and a partnership if the same

• Redeemable

ground

rents,

excluding

persons own more than 50% of the out-

amounts paid in redemption.

standing value of the corporation’s stock and

• Premiums paid or accrued for mortgage in-

more than 50% of the capital interest or prof-

surance.

its interest in the partnership.

• An S corporation and another S corporation if

What Are “Rental Expenses”?

the same persons own more than 50% in

value of the outstanding stock of each corpo-

For purposes of the statutory requirement to add

ration.

back related entity rental expenses, “rental ex-

• An S corporation and a C corporation if the

penses” means expenses for the use of (or the

same persons own more than 50% in value of

right to use) real property or tangible personal

the outstanding stock of each corporation.

property in connection with real property.

• An executor of an estate and a beneficiary of

Services furnished or rendered in connection

such estate.

with rented property are also considered “rental

expenses” and are subject to the addback re-

Additionally, the following relationships involving

quirement if the services are furnished by a re-

partnerships and limited liability companies

lated entity in connection with property rented

(LLCs) are “related persons”:

from a related entity. Such services would con-

• A partnership and a partner who holds a di-

stitute “rental expenses” regardless of whether

rect or indirect capital or profits interest in that

the same related entity furnished the services as

partnership of more than 50%.

rented the property.

• An LLC and a member who holds a direct or

The method used to compute the expense and

indirect interest in that LLC of more than 50%.

the manner in which it is reported for financial

• Two partnerships or LLCs if a single partner

accounting purposes has no effect on whether

or member owns, directly or indirectly, more

the expense is a “rental expense” under the add-

than 50% of both entities.

back statute. For example, amounts paid under

capital leases may not be called “rental ex-

penses” in the financial accounting records, but

For relationships that involve ownership of stock,

they are considered “rental expenses” under the

assets, or net profits, Wisconsin generally fol-

addback statute.

lows the constructive ownership rules of section

318(a), IRC.

What Are “Interest Expenses”?

For purposes of the statutory requirement to add

back related entity interest expenses, “interest

expenses” means interest that would otherwise

Instructions For 2008 Schedule Rt - State Of Wisconsin Page 3

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