Publication 102 - Wisconsin Tax Treatment Of Tax-Option (S) Corporations And Their Shareholders Page 2
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30TABLE OF CONTENTS
I.
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
D.
Taxing a Tax-Option (S) Corporation . . . . . . . . 10
1.
Franchise Tax Measured by Federal, State,
and Municipal Government Interest . . . . 10
II.
DEFINITIONS APPLICABLE TO TAX-OPTION (S)
CORPORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.
Wisconsin Built-in Gains Tax . . . . . . . . . 10
A.
Internal Revenue Code . . . . . . . . . . . . . . . . . . . . 1
3.
Tax on Net Income of a Tax-Option (S)
Corporation . . . . . . . . . . . . . . . . . . . . . . . . 11
B.
S Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
C.
Qualified Subchapter S Trust (QSST) . . . . . . . . 2
4.
Wisconsin’s Temporary Recycling
Surcharge . . . . . . . . . . . . . . . . . . . . . . . . . 12
D.
Electing Small Business Trust (ESBT) . . . . . . . . 2
E.
Making Corporate Estimated Tax Payments . . 12
E.
Qualifying Subchapter S Subsidiary (QSSS) . . . 2
F.
Preparing the Return, Form 5S . . . . . . . . . . . . . 13
F.
Tax-Option (S) Corporation . . . . . . . . . . . . . . . . 3
G.
Computing Wisconsin Income of Multistate
Corporations Having Only Wisconsin Resident
III.
YEARS TO WHICH WISCONSIN’S TAX-
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
OPTION (S) CORPORATION LAW APPLIES . . . . . 3
H.
Computing Wisconsin Income of Nonresident
A.
1978 and Prior Taxable Years . . . . . . . . . . . . . . . 3
Shareholders of Multistate Corporations . . . . . 13
B.
1979 Through 1986 Taxable Years . . . . . . . . . . . 3
C.
1987 Taxable Year and Thereafter . . . . . . . . . . . 3
VIII.
WHEN SHAREHOLDERS MUST REPORT
D.
Taxable Years Beginning On or After January 1,
CORPORATE INCOME (LOSS) . . . . . . . . . . . . . . . 13
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A.
Reporting Income (Loss) on the Shareholders’
Income Tax Returns . . . . . . . . . . . . . . . . . . . . . . 13
IV.
CORPORATIONS SUBJECT TO WISCONSIN TAX-
B.
Making Estimated Tax Payments . . . . . . . . . . . 14
OPTION (S) LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A.
Electing Tax-Option (S) Corporation Status . . . 4
IX.
SHAREHOLDERS’ WISCONSIN INCOME TAX
B.
Special Rules When Converting Existing Regular
RETURNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(C) Corporations . . . . . . . . . . . . . . . . . . . . . . . . . 4
A.
Corporate Income Reportable by Shareholders 15
1.
Wisconsin Built-in Gains Tax . . . . . . . . . . 4
B.
Individual Transitional Adjustments . . . . . . . . . 15
2.
Recapture of LIFO Benefits . . . . . . . . . . . . 4
C.
Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.
Corporate Preference Addbacks . . . . . . . . 5
1.
Differences Between Federal and Wisconsin
Tax-Option (S) Items . . . . . . . . . . . . . . . . 15
V.
SHAREHOLDERS SUBJECT TO WISCONSIN TAX-
2.
Federal Itemized Deductions . . . . . . . . . . 15
OPTION (S) LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.
Corporate Distributions . . . . . . . . . . . . . . 16
A.
Shareholders of Tax-Option (S) Corporations That
4.
Gain or Loss on Disposition of Capital
Are Subject to Wisconsin’s Tax-Option (S) Law 5
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B.
Shareholders of S Corporations That Aren’t
D.
Corporate Losses Deductible by Shareholders . 17
Subject to Wisconsin’s Jurisdiction . . . . . . . . . . 5
1.
Basis Limit . . . . . . . . . . . . . . . . . . . . . . . . 18
2.
At-Risk Limit . . . . . . . . . . . . . . . . . . . . . . 19
VI.
TERMINATION OF TAX-OPTION (S)
3.
Passive Activity Limit . . . . . . . . . . . . . . . 19
TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
E.
Credits Available for Shareholders . . . . . . . . . . 20
A.
Termination Under the Internal Revenue Code . 5
1.
Research Credits . . . . . . . . . . . . . . . . . . . . 20
1.
Voluntary Termination . . . . . . . . . . . . . . . . 6
2.
Manufacturer’s Sales Tax Credit . . . . . . . 20
2.
Involuntary Termination . . . . . . . . . . . . . . 6
3.
Development Zones Credits . . . . . . . . . . . 20
B.
Electing Out of Wisconsin Tax-Option
4.
Supplement to Federal Historic
Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Rehabilitation Tax Credit . . . . . . . . . . . . . 21
C.
Withdrawing the Wisconsin “Opt-Out” Election 7
5.
Farmland Preservation Credit . . . . . . . . . 21
D.
Revoking the Wisconsin “Opt-Out” Election . . . 7
6.
Farmland Tax Relief Credit . . . . . . . . . . . 21
1.
Voluntary Revocation . . . . . . . . . . . . . . . . . 7
7.
Credit for Taxes Paid to Other States by
2.
Automatic Revocation . . . . . . . . . . . . . . . . 7
Wisconsin Resident Shareholders . . . . . . 21
F.
Wisconsin Resident Shareholders of S
VII.
THE TAX-OPTION (S) CORPORATION’S
Corporations That Aren’t Required to File
WISCONSIN FRANCHISE OR INCOME TAX
Wisconsin Franchise or Income Tax Returns . . 22
RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
G.
Combined Return for Nonresident Shareholders 23
A.
Selecting the Taxable Year . . . . . . . . . . . . . . . . . 7
B.
Adopting an Accounting Method . . . . . . . . . . . . 8
X.
TAX TREATMENT OF DISTRIBUTIONS . . . . . . . 23
C.
Computing Corporate Income (Loss) . . . . . . . . . 8
1.
Computation of Federal Income . . . . . . . . 8
XI.
SHAREHOLDER’S BASIS IN CAPITAL STOCK . 26
2.
Additions To and Subtractions From Federal
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
XII.
ADDITIONAL INFORMATION OR FORMS . . . . . 28
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