Schedule K-1 Instructions - Shareholder'S Statement Of Income & Deductions

NSTRUCTIONS FOR THE

REPARATION OF

SCHEDULE

LABAMA

EPARTMENT OF

EVENUE

2003

K-1

Alabama S Corporation

Shareholder’s Statement of Income & Deductions

INSTRUCTIONS

Instructions To S Corporation

Instructions To Shareholder

SHAREHOLDER INFORMATION. In the space provided, enter the shareholder’s

The amounts shown on lines 7, 8, 9a, 9b, 11, and 12 of Schedule K-1 should be

social security number or federal employer identification number, name, and

entered on the appropriate lines of your 2002 Alabama income tax return (Form 40

address. Also indicate the resident status and the percentage of share-days of this

for residents and 40NR for nonresidents). If the sum of the separately stated and

shareholder during the corporation’s tax year.

nonseparately stated items of income, loss, and deduction is a net loss, the net loss

to be deducted on the Alabama individual return may not exceed the shareholder’s

S CORPORATION INFORMATION. In the space provided, enter the corporation’s

Alabama adjusted basis in the stock of the Alabama S corporation, plus the share-

federal employer identification number, name, and address. If the corporation has

holder’s Alabama adjusted basis in any indebtedness of the Alabama S corporation

activities in any state other than Alabama, also indicate the Alabama apportionment

to the shareholder. See Rule 810-3-162-.01(3).

ratio.

Line 7. Net Distributive Share of Income/Loss. The amount shown on line 7

Lines 1 through 9a. Enter this shareholder’s distributive share of income, loss,

should be entered on Form 40 or 40NR, Schedule E.

deduction, and credit attributed to Alabama. For example, if the corporation has

non-separately stated income of $100,000 and its Alabama apportionment ratio is

Line 8. Contributions. The amount shown on line 8 should be added to any other

10%, the income attributed to Alabama is $10,000. If the shareholder’s percentage

contributions the shareholder made, and the total should be entered on Schedule

of share-days ownership is 10%, the amount to be entered on line 1 is 10% of

A. See the instructions for Schedule A, Form 40 or Form 40NR, for further infor-

$10,000 or $1,000. This same procedure is used to determine the amounts to be

mation.

entered on lines 2, 4, 6, 8, and 9a, if appropriate. Each recognized built-in gain item

and each passive investment income item is reduced by its proportionate share of

Line 9a. Income Taxes Paid to U.S. The amount shown on line 9a should be

the built-in gains tax and excess net passive income tax respectively before enter-

included in the Federal Income Tax deduction claimed on Form 40 or Form 40NR.

ing on the Schedule K-1.

See the instructions for Form 40 or Form 40NR for further information.

Line 9b. Enter the amount of composite payment made to Alabama by the corpo-

Line 9b. Composite Payment Made by S Corporation. The amount shown on

ration on behalf of this shareholder only if this shareholder is a nonresident.

line 9b should be claimed by nonresidents as an estimated payment on the Form

40NR, page 1, line 24. If a nonresident shareholder claims a composite payment,

Line 11. See instructions for lines 1 through 9a.

a Schedule K-1 must be attached to Form 40NR.

Line 12. Enter this shareholder’s pro rata share of the total §179 expense. Attach

Line 11. Casualty Losses. The amount shown on line 11 may be claimed as an

a statement of this shareholder’s share of each appropriate item of information in

itemized deduction on Schedule A, Form 40 or Form 40NR if such amount exceeds

Section A, Part 1, of the corporation's Federal Form 4562.

10% of your adjusted gross income. Federal Form 4684 must be attached to indi-

vidual returns. See the instructions for Schedule A for further information.

Line 13a. Include on this line the interest expense allocable to debt on property

held for investment purposes.

Line 12. I.R.C. Section 179 Expense. The §179 expense deduction is limited to

$100,000 for 2003, 2004 and 2005 per individual. When completing Section A, Part

Lines 13b and 13c. Enter on line 13b only the investment income included on line

1, of the Federal Form 4562, use the information provided by the S corporation

3 above. Enter on line 13c only the investment expenses included on line 3 above.

along with information from other sources. The §179 expense deduction informa-

tion will be provided on a separate schedule for each shareholder. This will allow

Line 14. Enter total distributions made to this shareholder other than dividends

for the determination of the allowable deduction using Alabama income (loss).

reported on Form 99-DIV. Noncash distribution of appreciated property is valued at

Enter this figure as a negative amount on Form 40 or Form 40NR, page 2, Part 1,

fair market value.

“other income” line. This allowable amount (or portion thereof) is allowable only if it

has not been included elsewhere on the return.

Line 15. Enter the amount of loan repayments made by the corporation to this

shareholder.

Line 13a. Interest Expense on Investment Debts. The amount shown on line 13a

should be added to investment interest expense from other sources and entered on

Line 16. Enter this shareholder’s basis in the S corporation.

Form 4952A to determine how much of your total investment interest is deductible.

If this shareholder is not a resident of Alabama, an Alabama Schedule NRA must

Lines 13b and 13c. Investment Income and Investment Expenses. Investment

be completed and submitted with this schedule and Form 20S if one has not been

income and investment expenses on these lines should be combined with invest-

previously filed. If the Alabama Schedule NRA is not submitted for a nonresident

ment income and investment expenses from other sources and entered on Form

shareholder, the corporation must complete Form 20SC, Nonresident Composite

4952A.

Payment Return and Extension, on behalf of that shareholder and pay to the State

an amount equal to the highest income tax rate applicable to individuals (five per-

Line 14. Distributions. Reduce your basis in stock of the corporation by the dis-

cent) multiplied by the shareholder’s pro rata share of income allocated and appor-

tributions on this line. If these distributions exceed your basis, the excess is treat-

tioned to this State.

ed as gain on investment and is reported on Schedule D, Form 40 or 40NR.

Two copies of this schedule shall be distributed to the shareholder and a copy

Line 15. Amount of Loan Repayments to Shareholders. If these payments are

attached to Form 20S. An additional copy shall be maintained with the corporation’s

made on indebtedness with a reduced basis, the repayments result in income to

books and records. Form 20S will be considered incomplete if Schedule K-1’s are

you to the extent the repayments are more than the adjusted basis of the loan. See

not properly completed and attached to Form 20S.

§§40-18-164 and 40-18-173, Code of Alabama 1975 and IRS Revenue Ruling 64-

162, 1964-1 (Part 1) C.B. 304.

Line 16. Basis. This is your basis in the Alabama S corporation.

Schedule K-1 Instructions - Shareholder'S Statement Of Income & Deductions - 2003

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