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• The allocation percentage for non-taxable qualified gain is computed as follows:

$ 80,000

= 40%

$200,000

– $80,000 reflects the FMV of qualified Wisconsin investments made in XYZ ($30,000 + $50,000) by Partner A on 5-31-2011

and 12-31-2011.

– $200,000 reflects the FMV of the total investments made in XYZ by Partner A.

• The non-taxable qualified gain is computed as follows:

$900,000 x 40% = $360,000

– $900,000 is the gain on the sale of the investment without an adjustment to Wisconsin tax basis for deferred long-term

gain (Note If there were differences in Wisconsin tax basis besides deferred long-term gain, they must be reflected in the

Wisconsin tax basis before computing the gain used in the non-taxable qualified gain allocation. See example 3 below).

• $360,000 is the non-taxable qualified gain reported on line 10 of Schedule QI and must be reported on line 15a of Schedule

WD. The net taxable gain from the sale of the investment is $560,000.

• The sale of the investment is entered on Schedule QI as follows:

Line 1

Date investment sold: 12 31 2016

Line 2

Purchase date of initial investment in the qualified Wisconsin business: 05 31 2011

Line 3

Type of investment:

Stock purchase

X Partnership interest

LLC membership

Line 4

Entity Name:

XYZ LLC

FEIN: xx-xxxxxxx

Line 5

Sales price of investment as reported on federal Form 8949 . . . . . . . . . . . . . . . . . . . . 1000000

Line 6

Cost or other basis adjusted for Wisconsin as reported on Schedule T . . . . . . . . . . . . 80000

Line 7

Deferred long-term gain included in the investment . . . . . . . . . . . . . . . . . . . . . . . . . . .

20000

Line 8

Add line 6 and line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100000

Line 9

Amount used to determine non-taxable qualified gain.

Subtract line 8 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

900000

Non‑taxable Long‑Term Gain

Line 10 Amount you computed to be non-taxable qualified gain.

(Enter on line 15a of Schedule WD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

360000

Taxable Long‑Term Gain

Line 11

Add line 6 and line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

440000

Line 12 Net taxable long-term gain or (loss). Subtract line 11 from 5 . . . . . . . . . . . . . . . . . . .

560000

Example 3 (Deferred Gain and Other Basis Adjustment)

• Partnership XYZ’s Partners A and B each have a 50% interest.

• The partnership was a qualified Wisconsin business for 2011, 2012, 2013, and 2014.

• The investment made in XYZ on 5-31-2011 included $20,000 of deferred long-term capital gain from an asset previously sold.

• The Wisconsin tax basis in the investment is $50,000 more than the federal basis due to depreciation differences.

• On 12-31-2016, Partner A liquidated its partnership interest in XYZ.

Investments Partner A made in XYZ and the gain from the sale of its partnership interest in XYZ are as follows:

(The chart below reflects federal basis and has not been adjusted for Wisconsin)

Date of

FMV of the

Sales Price

Tax Basis of

Gain on Sale

Investment

12-31-2016

Investment

of Investment

5-31-2009

$ 35,000

5-31-2010

$ 20,000

5‑31‑2011

$ 30,000

12‑31‑2011

$ 50,000

12-31-2012

$ 15,000

12-31-2013

$ 10,000

12-31-2014

$ 15,000

12-31-2015

$ 10,000

12-31-2016

$ 15,000

Total

$200,000

$1,000,000

$100,000

$900,000

- 7 -

I-177 (N. 12-16)

Wisconsin Department of Revenue

Instructions For 2016 Schedule Qi - Sale Of Investment In A Qualified Wisconsin Business Page 7

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