Instructions For Form 3 - Wisconsin Partnership Return

Line-by-Line Instructions (continued)

Page 8

Example 1. Two nonresident individuals are partners of a partnership

If the partnership is a nonunitary, multistate business, complete a

that does business only in Wisconsin. Both nonresidents are taxed on

schedule similar to Form 4C that shows the allocation of the Wiscon-

their entire share of the partnership income for Wisconsin income tax

sin amounts from Schedule 3K, column d, to Wisconsin and outside

purposes.

Wisconsin. This schedule should also show the basis of such alloca-

tion. Compute the Wisconsin amount of each item to enter on

Example 2. A nonresident is one of two equal partners of a partner-

Schedule 3K-1, column d, by multiplying the amount allocated to

ship that does business in Wisconsin and Illinois. The partnership

Wisconsin on such a schedule by the nonresident partner’s propor-

derives 40% of its income from business activities in Wisconsin and

tionate share.

60% from business activities in Illinois. The Wisconsin resident

partner operates the Wisconsin business. The nonresident partner

If the partnership derives income from personal services, a nonresi-

operates the Illinois business. The Wisconsin resident is taxed on one-

dent partner’s Wisconsin amount (column d) is equal to the value of

half of the total partnership income for Wisconsin income tax pur-

the services he or she personally performed in Wisconsin. If the

poses. The nonresident is taxed on one-half of the 40% of the

nonresident partner didn’t personally perform any services in Wis-

partnership income attributable to business activities in Wisconsin.

consin, the Wisconsin amount for that partner is zero. The adjustment

(column c) is the amount necessary to reconcile the federal amount

Example 3. A nonresident is a limited partner, with a 1% interest in

and the Wisconsin amount. This adjustment includes the partner’s

partnership profits, of a partnership that derives income from real

share of any adjustment on Schedule 3K, column c, as well as the

estate located in Wisconsin and in other states. The nonresident

partner’s share of the amount on Schedule 3K, column d, that isn’t

limited partner is taxed on 1% of the partnership income attributable

taxable by Wisconsin.

to the real estate located in Wisconsin.

Note: Regardless of any provision in the partnership agreement, a

Example 4. A nonresident is a partner, with a 10% interest in partner-

nonresident partner must limit the amount of his or her non-

ship profits, of a certified public accounting firm that operates in and

Wisconsin income to the same percentage that the partnership’s non-

outside Wisconsin. One-fourth of the partnership’s income is attribut-

Wisconsin income is to all its income. In addition, a nonresident

able to professional services performed in Wisconsin and three-

partner must limit the amount of his or her Wisconsin losses or de-

fourths is attributable to professional services performed in other

ductions to the same percentage that the partnership’s Wisconsin

states. The nonresident partner doesn’t personally perform any serv-

losses or deductions are to all its losses or deductions. The characteri-

ices in Wisconsin. The nonresident isn’t subject to Wisconsin income

zation in a partnership agreement of payments to nonresident partners

tax on his or her proportionate share of the partnership income earned

as salary, or as interest for the use of capital, can’t affect the determi-

in Wisconsin.

nation of whether such payments are derived from Wisconsin sources.

If the partnership’s entire income is derived from business transacted

D. Individual Part-Year Residents of Wisconsin

or property located in Wisconsin, a nonresident partner’s share of the

adjustment and Wisconsin amount of each item is the partner’s pro-

Individuals who are part-year residents of Wisconsin must report to

portionate share of the adjustment and Wisconsin amount shown on

Wisconsin —

Schedule 3K, columns c and d, respectively.

• All partnership income or loss, regardless of where it is earned or

If the partnership derives income from business transacted or prop-

incurred, while they were residents of Wisconsin, and

erty located in and outside Wisconsin (that is, it’s a multistate

• All partnership income or loss derived from business transacted

partnership), a nonresident partner’s Wisconsin amount (column d)

in Wisconsin, personal services they personally performed in

of each item is the partner’s proportionate share of the portion attrib-

Wisconsin, or real or tangible personal property located in Wis-

utable to Wisconsin (based on apportionment or separate accounting,

consin, while they were nonresidents of Wisconsin.

as appropriate). The adjustment (column c) is the amount necessary

to reconcile the federal amount and the Wisconsin amount. The

If the partnership’s entire income is derived from business transacted

adjustment includes the partner’s share of any adjustment on Sched-

or property located in Wisconsin, a part-year resident partner’s share

ule 3K, column c, as well as the partner’s share of the amount on

of the adjustment and Wisconsin amount of each item is the partner’s

Schedule 3K, column d, that isn’t attributable to Wisconsin. Compute

proportionate share of the adjustment and Wisconsin amount shown

the Wisconsin amount of each share item (Schedule 3K-1, column d)

on Schedule 3K, columns c and d, respectively.

by multiplying the amount attributable to Wisconsin by the nonresi-

dent partner’s proportionate share. See the example on page 10.

If the partnership derives income from activities in and outside Wis-

consin (that is, it’s a multistate partnership), a part-year resident

If the partnership is a unitary, multistate business, complete Form 4B

partner computes the Wisconsin amount of each item in two parts:

and enter the apportionment percentage from Form 4B, line 28 or 33,

one for the portion of the partnership’s taxable year that the partner

in the space provided in item L for each nonresident partner. Compute

was a resident of Wisconsin and one for the portion of the partner-

the nonresident partner’s Wisconsin amount of each item by multi-

ship’s taxable year that the partner was a nonresident of Wisconsin.

plying the Wisconsin amount from Schedule 3K, column d, by the

For this purpose, the amount of any share item is determined on a

apportionment percentage and multiplying that result by the partner’s

daily basis. That is, every share item is allocated between the periods

proportionate share.

during which the partner was a resident or nonresident based on the

number of days during the partnership’s taxable year that the partner

If the partnership has nonapportionable income (loss) on Form 4B,

was a resident or nonresident of Wisconsin. The partner’s share of an

line 5, figure the nonresident partner’s Wisconsin amount of any

item for each period (resident or nonresident) is figured in the same

affected item by multiplying the amount of the nonapportionable item

manner as that of full-year residents and nonresidents, respectively.

attributed to Wisconsin on Form 4B by the partner’s proportionate

See the example on page 10.

share.

Instructions For Form 3 - Wisconsin Partnership Return - 1998 Page 8

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