Publication 102 - Wisconsin Tax Treatment Of Tax-Option (S) Corporations And Their Shareholders Page 15
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30Wisconsin Tax Treatment of Tax-Option (S) Corporations and Their Shareholders
In addition, each shareholder must attach a statement to
H. Computing Wisconsin Income of Nonresident
the front of his or her Wisconsin income tax return
Shareholders of Multistate Corporations
indicating the corporation’s name, identification number,
and amount of payments made on his or her behalf.
A tax-option (S) corporation deriving income in and outside
Wisconsin and having any nonresident shareholders for any
F. Preparing the Return, Form 5S
part of the taxable year must determine its income, loss, and
deductions allocable to Wisconsin. All tax-option items are
passed through to the shareholders on a daily basis, unless a
A tax-option (S) corporation must report its income, loss, and
shareholder terminates all interest in the corporation during
deductions on Wisconsin Form 5S. All appropriate lines on
the form, including Schedules 5K and 5M, must be com-
the taxable year and the corporation elects to allocate all tax-
pleted.
option items as provided under IRC section 1377(a)(2). See
Part IX.A.
In addition, the corporation must complete a Wisconsin
A unitary, multistate corporation, determines its apportion-
Schedule 5K-1, Wisconsin Tax-Option (S) Corporation
ment percentage on Form 4B and shows the modifications
Shareholder’s Share of Income, Deductions, etc., for each
required on Wisconsin Schedule 5K-1 for each of its nonresi-
shareholder.
dent shareholders. A nonunitary, multistate corporation must
complete a schedule similar to Form 4C to show the amounts
Exception: If the corporation does business only in Wis-
allocable to Wisconsin before filling in Schedule 5K-l for
consin and has no adjustments in column c or Wisconsin
each of its nonresident shareholders.
credits in column d of Schedule 5K, it isn’t necessary to
prepare a Wisconsin Schedule 5K-1 for each shareholder. In
Example: A nonresident held 50% of a corporation’s capital stock
addition, a Schedule 5K-1 isn’t required for a full-year
from January 1 through September 30, 1997. On October 1, 1997,
Wisconsin resident shareholder of a corporation that is
the shareholder sold the stock to a Wisconsin resident. The corpora-
engaged in business in and outside Wisconsin provided there
tion’s ordinary income for the calendar year 1997 is $20,000. At
aren’t any Wisconsin adjustments or credits. Be sure to state
the end of the year the corporation determines under the apportion-
on the shareholders’ federal Schedules K-1, including the
ment method that 65% of the year’s income is derived in Wis-
copies filed with the Department of Revenue, that there
consin. Assuming the corporation doesn’t make a section
aren’t any Wisconsin adjustments or credits.
1377(a)(2) election, the nonresident shareholder must report $4,862
of ordinary income to Wisconsin, which is computed as follows:
The corporation must attach a complete copy of federal Form
65% x 50% x 273/365 x $20,000 = $4,862. The nonresident
1120S and all accompanying schedules and Wisconsin
shareholder’s Schedule 5K-1 will show $7,479 as the federal
Schedules 5K-1, if required, to the Form 5S that it files with
amount (column b), $(2,617) as the adjustment (column c), and
$4,862 as the Wisconsin amount (column d).
the Department of Revenue.
G. Computing Wisconsin Income of Multistate
O
VIII. WHEN SHAREHOLDERS MUST REPORT
Corporations Having Only Wisconsin Resident
CORPORATE INCOME (LOSS)
Shareholders
For Wisconsin purposes, the shareholder’s share of corporate
A tax-option (S) corporation deriving its income in and
income, loss, and deductions is considered to be received
outside Wisconsin and having only Wisconsin resident
throughout the corporation’s taxable year, just as it is under
shareholders doesn’t allocate its income, loss, and deductions
the provisions of the Internal Revenue Code. Taxable
between Wisconsin and elsewhere when completing Wiscon-
distributions received from the corporation are taxable as of
sin Schedules 5K-l for its shareholders. The Wisconsin
the day of receipt, although their treatment may not be
resident shareholders must report their shares (based on stock
determined until year-end.
ownership) of the corporation’s entire income regardless of
the source.
A. Reporting Income (Loss) on the Shareholders’
Income Tax Returns
However, for purposes of the temporary recycling surcharge,
a multistate corporation must determine its net income
attributable to Wisconsin even if all of its shareholders are
Each shareholder, whether a resident or nonresident of
Wisconsin residents.
Wisconsin, must report his or her share of a tax-option (S)
corporation’s income, loss, and deductions in his or her
taxable year in which or with which the taxable year of the
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