Instructions For 2008 Schedule Rt - State Of Wisconsin (Page 7 of 12) in pdf

Wisconsin Schedule RT Instructions

Page 7

• State X has a maximum corporation income

Item A, Box i.: Less Than 100% of Interest

Expense Paid to Unrelated Entity

tax rate of 6.2%.

In the example above, Related Corporation C’s

If less than 100% of the interest expense paid,

aggregate effective tax rate would be 6.2%.

accrued, or incurred to the related entity from

the taxpayer and all other related entities is paid

to an unrelated entity within the taxpayer’s tax-

Item A, Box ii.: Differing Reporting Periods

able year, a pro rata share of the taxpayer’s ex-

If the related entity to which the taxpayer paid,

pense is considered to be paid, accrued, or in-

accrued, or incurred the expenses is on a tax-

curred to the unrelated entity.

able year that ends before the taxpayer’s tax-

Example:

able year, determine the related entity’s aggre-

gate effective tax rate based on the related en-

• Taxpayer A made a $100 interest payment to

tity’s most recently ended taxable year.

Related Entity B.

• Related Entity B received a total of $400 of

If the related entity is on a taxable year that ends

after the taxpayer’s taxable year, the taxpayer

related entity interest income during Taxpayer

may not know what the related entity’s appor-

A’s taxable year. $100 of this amount was

tionment percentages and taxing states will be

from Taxpayer A and $300 was from other re-

for the related entity’s taxable year. In this case,

lated entities.

the aggregate effective tax rate may be deter-

• In Taxpayer A’s taxable year, Related Entity

mined as follows:

B pays $200 of interest expense to unrelated

third parties.

• If in the related entity’s most recently ended

taxable year it was subject to a tax on or

In the example above, $50 (($100/$400) x $200)

measured by net income or receipts in a

of the interest Taxpayer A paid to Related Entity

state, U.S. possession, or foreign country, the

B would be considered to be paid, accrued, or

related entity’s aggregate effective tax rate

incurred to an unrelated entity.

may be computed based on the related en-

tity’s most recently ended taxable year.

Item A, Box ii.: Related Entity With Loss or

• If the related entity was not subject to such

Credit Carryforwards

tax for its most recently ended taxable year,

If the related entity to which the taxpayer paid,

you may modify the computation of the ag-

accrued, or incurred the expenses pays no tax

gregate effective tax rate as shown below.

based on income or receipts because it has loss

(Caution: You may not compute the related

carryforwards or credit carryforwards, the maxi-

entity’s aggregate effective tax rate in this

mum statutory tax rate and the entity’s appor-

manner for any subsequent taxable year.):

tionment percentage in each state where it

Use 100% as the related entity’s appor-

would otherwise have a tax liability may be in-

tionment percentage.

cluded in the computation of the aggregate ef-

fective tax rate.

Use the statutory tax rate of the state

where the related entity is incorporated,

Example:

organized, formed, or (if the related en-

tity is an individual), where the individual

• Taxpayer A makes a $500,000 interest pay-

resides.

ment to Related Corporation C.

• Related Corporation C has no other income

Item A, Box ii.: Taxpayer or Related Entity Is

and is engaged in business only in State X.

a Pass-Through Entity

• Related Corporation C has a $1,000,000 loss

For a pass-through entity, the aggregate effec-

carryforward in State X. C uses this carryfor-

tive tax rate cannot include taxes imposed on

ward to offset the $500,000 related entity in-

the entity’s members. If a pass-through entity

terest income and therefore owes no tax to

elects to file a composite return in a state on be-

State X.

Instructions For 2008 Schedule Rt - State Of Wisconsin Page 7

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