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Line Q – Portfolio Income. Enter the pass-through entity owner’s

Line Z – Oil and Gas Depletion. Enter the pass-through entity

prorata share of the portfolio income apportioned to Alabama. The total

owner’s prorata share of the oil and gas depletion apportioned to

amount apportioned to Alabama for the pass-through entity is reported

Alabama. The total amount apportioned to Alabama for the pass-

on Schedule K, line 6 (Alabama Amount column) of the accompanying

through entity is reported on Schedule K, line 3 (Alabama Amount col-

Alabama Form 65 or Alabama Form 20S. The different types and

umn) of the accompanying Alabama Form 65 or Alabama Form 20S.

amounts of portfolio income items must be provided to the pass-through

The computation of the amount reported on Line Z of the Alabama

entity owner with the Alabama Schedule K-1.

Schedule K-1 must be provided to the pass-through entity owner with

the Alabama Schedule K-1.

Line R – Other Expenses Related to Portfolio Income – Do Not

Line AA – Separately Stated Nonbusiness Items. Enter the pass-

Include Interest Expense. Enter the pass-through entity owner’s pro-

through entity owner’s prorata share of separately stated nonbusiness

rata share of the other expenses related to portfolio income apportioned

items allocated to Alabama. The total amount allocated to Alabama for

to Alabama. The total amount apportioned to Alabama for the pass-

the pass-through entity is reported on Schedule K, line 10 (Alabama

through entity is reported on Schedule K, line 8 (Alabama Amount col-

Amount column) of the accompanying Alabama Form 65 or Alabama

umn) of the accompanying Alabama Form 65 or Alabama Form 20S.

Form 20S. The pass-through entity owner must be provided with the

Interest expense must not be included in this amount. The pass-

nature and amounts of the different separately stated nonbusiness

through entity owner must be provided with the nature and amounts of

items reported on Line AA.

the different expenses reported on Line R with the Alabama Schedule

K-1.

Line AB – Alabama Exempt Income. Enter the pass-through entity

owner’s prorata share of income exempt from Alabama income taxation.

Line S – Charitable Contributions. Enter the pass-through entity

The total amount of Alabama exempt income for the pass-through entity

owner’s prorata share of the charitable contributions apportioned to

is reported on Schedule K, line 13 (Alabama Amount column) of the

Alabama. The total amount apportioned to Alabama for the pass-

accompanying Alabama Form 65 or the Alabama Form 20S. The pass-

through entity is reported on Schedule K, line 2 (Alabama Amount col-

through entity owner must be provided with the nature and amounts of

umn) of the accompanying Alabama Form 65 or Alabama Form 20S.

the different Alabama exempt income reported on Line AB.

Line T – Other Separately Stated Business Items. Enter the

pass-through entity owner’s prorata share of the other separately stated

Instructions to Pass-Through Entity Owner

business items apportioned to Alabama. The total amount apportioned

Important Information for pass-through entity owners that are

to Alabama for the pass-through entity unit is reported on Schedule K,

not individuals. Pass-through entity owners that are not individu-

line 9 (Alabama Amount column) of the accompanying Alabama Form

65 or Alabama Form 20S. The nature and amount of each different

als, but are corporations or subchapter K entities can create nexus

(a presence subjecting the pass-through entity owner to Alabama

separately stated business item must be provided to the pass-through

income taxation) in Alabama by having an ownership interest in a

entity owner with the Alabama Schedule K-1.

pass-through entity doing business in Alabama. Also, having an

Line U – Composite Payment Made on Behalf of the

ownership interest in a pass-through entity doing business in

Owner/Shareholder. Enter the amount of the Alabama composite pay-

Alabama can subject the pass-through entity owner (which is a

ment made on behalf of the pass-through entity owner. The total

corporation or subchapter K entity) to the requirements of the

amount of composite payments made by the pass-through entity is

Alabama Multistate Tax Compact. The Alabama Department of

reported on Schedule K, line 11 (Alabama Amount column) of the

Revenue’s website ( ) has additional

accompanying Alabama Form 65 or Alabama Form 20S.

information available concerning Alabama income tax laws and

regulations; the Alabama Multistate Tax Compact; Alabama tax

Line V – U.S. Income Taxes Paid. Enter the pass-through entity

forms and instructions; as well as, frequently asked questions

owner’s prorata share of the U.S. income taxes paid by the pass-

should you need to conduct more in-depth research.

through entity and apportioned to Alabama, if any. The total amount

apportioned to Alabama for the pass-through entity is reported on

The remainder of these instructions are directed toward

Schedule K, line 12 (Alabama Amount column) of the accompanying

pass-through entity owners that are individual

Alabama Form 65 or Alabama Form 20S.

taxpayers.

Line W – Casualty Losses. Enter the pass-through entity owner’s

Line M – Nonseparately Stated Income Allocated and

prorata share of the casualty losses apportioned to Alabama. The total

Apportioned to Alabama.

amount apportioned to Alabama for the pass-through entity is reported

on Schedule K, line 5 (Alabama Amount column) of the accompanying

Pass-through entity owners that are individuals would report this

Alabama Form 65 or Alabama Form 20S.

amount on Schedule E of the Alabama Form 40 or Alabama Form

40NR.

Line X – Withdrawals and Distributions. Enter the amount of dis-

tributions made to the pass-through entity owner. The total amount for

Line N – Amount of Guaranteed Payments to Partner to be

the pass-through entity is reported on Schedule K, line 14 (Alabama

Reported by the Partner as Alabama Source Income.

Amount column) of the accompanying Alabama Form 65 or Alabama

Form 20S. Provide with the Alabama Schedule K-1 a detailed explana-

Line N applies only to owners of subchapter K entities.

tion of the amount reported on Line X.

Pass-through entity owners that are individuals would report this

Line Y – Additional Information. Enter additional information, as

amount on Schedule E of the Alabama Form 40 or Alabama Form

needed.

40NR.

Instructions For The Preparation Of Alabama Department Of Revenue Pass Through Entity - Schedule K-1 - 2007 Page 2

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