Publication 102 - Wisconsin Tax Treatment Of Tax-Option (S) Corporations And Their Shareholders Page 5
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30Wisconsin Tax Treatment of Tax-Option (S) Corporations and Their Shareholders
•
It is not otherwise ineligible to be an S corporation.
if the corporate net income was reported by its shareholders.
If the corporation incurred a net loss for the year, the loss
was treated as the shareholders’ loss.
•
100% of its stock is held by an S corporation.
For Wisconsin tax purposes, unlike for federal tax purposes
•
The S corporation elects to treat the corporation as a
for taxable years beginning after December 31, 1982, tax-
QSSS.
option (S) corporations weren’t treated as pass-through
entities similar to partnerships. Instead, corporate income or
Note: A subsidiary that qualifies as a QSSS for federal
loss retained its character as business income or loss and
purposes is automatically treated as a QSSS for Wisconsin.
didn’t flow through as individual items of income, expense,
The S corporation isn’t required to make a separate Wiscon-
or capital gain or loss.
sin election, nor is it permitted to make a different election
for Wisconsin. The QSSS will be disregarded as a separate
C. 1987 Taxable Year and Thereafter
entity for Wisconsin purposes, the same as for federal
purposes. Its assets, liabilities, and items of income, deduc-
tion, and credit will be treated as those of the parent tax-
For corporations’ taxable years ending on or after July 31,
option (S) corporation.
1987, the Wisconsin tax-option (S) corporation law is
federalized; that is, based on the federal Internal Revenue
Code. Federal S corporations that are treated as Wisconsin
F. Tax-Option (S) Corporation
tax-option corporations compute their income under the
Internal Revenue Code in effect for Wisconsin purposes.
For Wisconsin purposes, a “tax-option (S) corporation” is
defined as a corporation which is treated as an S corporation
In addition, tax-option (S) corporations are now treated as
under Subchapter S of the Internal Revenue Code and has not
pass-through entities similar to partnerships, the same as for
elected out of tax-option corporation status under sec. 71.365
federal purposes. Items of income, loss, and deduction retain
(4)(a), Wis. Stats., for the current taxable year.
their character as business income or loss but pass through to
the shareholders and are included in the shareholders’ returns
O
as if received or accrued, paid or incurred directly by the
III. YEARS TO WHICH WISCONSIN’S TAX-
shareholders.
OPTION (S) CORPORATION LAW APPLIES
The federalized tax-option (S) law applies beginning with the
A. 1978 and Prior Taxable Years
shareholder’s 1987 or 1988 taxable year, as appropriate to
conform the shareholder’s treatment of income, loss, and
For corporations’ taxable years ending on or before June 30,
deductions to the tax-option (S) corporation’s treatment.
1979, Wisconsin law didn’t permit corporations to elect Sub-
chapter S treatment for Wisconsin purposes. A corporation
Because all tax-option items retain their character as business
electing Subchapter S status for federal purposes was taxed
income or loss, a nonresident shareholder’s share, as well as
as a regular (C) corporation for Wisconsin.
a resident’s share, of a tax-option (S) corporation’s intangi-
ble income, except interest on United States government
B. 1979 Through 1986 Taxable Years
obligations, bonds issued by the government of Puerto Rico,
and certain state and municipal government bonds, continues
For corporations’ taxable years ending from July 31, 1979,
to be taxable by Wisconsin.
through June 30, 1987, Wisconsin recognized tax-option (S)
corporation status. A corporation that elected and qualified
D. Taxable Years Beginning On or After January 1,
federally to be treated as a Subchapter S corporation was
1997
required to be treated as a tax-option (S) corporation for
Wisconsin tax purposes. However, a tax-option (S) corpora-
If a federal S corporation elects to treat a subsidiary as a
tion and its shareholders determined and reported their
qualified subchapter S subsidiary (QSSS) for federal pur-
incomes under special Wisconsin rules.
poses, that election applies for Wisconsin purposes. The
QSSS is disregarded as a separate corporation for Wisconsin
A tax-option (S) corporation computed its net income or net
purposes, and its assets, liabilities, and items of income,
loss under the same Wisconsin corporate franchise or income
deduction, and credit are treated as those of the parent tax-
tax law applicable to regular (C) corporations that filed
option (S) corporation. If Wisconsin has jurisdiction to
Wisconsin franchise or income tax returns. A tax-option (S)
impose franchise or income taxes on the QSSS, Wisconsin
corporation didn’t pay a Wisconsin franchise or income tax
3
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Financial