Publication 102 - Wisconsin Tax Treatment Of Tax-Option (S) Corporations And Their Shareholders Page 23
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30Wisconsin Tax Treatment of Tax-Option (S) Corporations and Their Shareholders
shareholders claim their pro rata shares of the credits by filing
earned there, the shareholder must submit a copy of
their own Schedules DC and Schedules 5K-1 with their
the other state’s tax return.
Wisconsin income tax returns.
+
The corporation files a combined or composite return
4.
Supplement to Federal Historic Rehabilitation Tax
with that state on behalf of the shareholders who are
Credit
nonresidents of that state and pays the tax on their pro
rata shares of the corporation’s income earned there,
the Wisconsin resident shareholder must attach a
The shareholders of a tax-option (S) corporation may claim
copy of his or her Wisconsin Schedule 5K-1 to the
credits for their pro rata shares of the corporation’s credits for
Wisconsin return filed. The corporation must allocate
rehabilitating certified historic structures located in Wisconsin
the tax paid to the other state among such sharehold-
and used for business purposes. This credit is computed at the
ers based on their pro rata shares of the income
corporate level on Wisconsin Schedule HR and then passed
earned in that state and report each shareholder’s
through to the shareholders. The shareholders claim their pro
share on Schedule 5K-1, line 13. The corporation
rata shares of the credit by filing their own Schedules HR and
must attach a copy of the other state’s tax return to
Schedules 5K-1 with their Wisconsin income tax returns.
the Form 5S it files with the Department of Revenue.
5.
Farmland Preservation Credit
+
The corporation files a corporate franchise or income
tax return with that state and pays tax on the income
A Wisconsin resident shareholder of a tax-option (S) corpora-
earned there that is attributable to the shareholders
tion that owns farmland located in Wisconsin may be able to
who are nonresidents of that state, the Wisconsin
claim credits based, in part, on his or her pro rata share of the
resident shareholder must attach a copy of his or her
corporation’s property taxes. The farmland preservation credit
Wisconsin Schedule 5K-1 to the Wisconsin return
is claimed by filing Wisconsin Schedule FC with the share-
filed. The corporation must allocate the tax paid to
holder’s Wisconsin income tax return.
the other state among such shareholders based on
their pro rata shares of the income earned in that state
6.
Farmland Tax Relief Credit
and report each shareholder’s share on Schedule 5K-
1, line 13. The corporation must attach a copy of the
Wisconsin resident shareholders of a tax-option (S) corpora-
other state’s tax return to the Form 5S it files with the
tion that owns farmland located in Wisconsin may qualify for
Department of Revenue.
the farmland tax relief credit. The credit is 10% of the share-
holder’s pro rata share of qualifying property taxes levied
Example: A Wisconsin tax-option (S) corporation
during 1997 on the corporation’s Wisconsin farmland. For
does business in another state which recognizes its S
more information, see the Wisconsin Form 1 or 1NPR instruc-
status but taxes the corporation on the nonresident
tions.
shareholders’ shares of the corporation’s income
earned in that state. The corporation has 5 equal
7.
Credit for Taxes Paid to Other States by Wisconsin
shareholders; 3 are Wisconsin residents and 2 are
Resident Shareholders
residents of the other state. For 1997, the corporation
has $50,000 of taxable income, of which $35,000 is
If a tax-option (S) corporation operates in any states other than
attributable to Wisconsin and $15,000 is attributable
Wisconsin and either the corporation or its shareholders must
to the other state. The corporation pays $780 of tax to
pay income or franchise taxes to that state on or measured by
the other state on $9,000 of income (the Wisconsin
the income earned there, the Wisconsin resident shareholders
resident shareholders’ pro rata shares (60%) of the
may claim credits for their pro rata shares of such taxes paid.
income attributable to that state ($15,000)). One-third
To qualify for the credit, the income taxed by the other state
of the tax paid, or $260, is allocated to each of the
must also be considered taxable income by Wisconsin. The
Wisconsin resident shareholders.
credit is claimed on Wisconsin Form 1, line 26, or Wisconsin
Form 1NPR, line 54.
b. If the corporation’s S status isn’t recognized by the
other state and the corporation pays an income or
The shareholders must submit verification of the amount of
franchise tax on or measured by the income earned
their credits with their Wisconsin income tax returns as
follows:
there, the Wisconsin resident shareholder must
attach a copy of his or her Wisconsin Schedule 5K-1
a.
If the corporation’s S status is recognized by the other
to the Wisconsin return filed. The corporation must
state and —
allocate the tax paid to the other state among all the
shareholders based on their pro rata shares of stock
+
The Wisconsin resident shareholder files an individ-
ownership and report each shareholder’s share on
ual income tax return with that state and pays tax on
Schedule 5K-1, line 13. The corporation must attach
his or her pro rata share of the corporation’s income
21
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