Shareholder'S Instructions For Schedule K-1 (Form N-35) (Page 2 of 2) in pdf

Shareholder’s Instructions for Schedule K-1 (Form N-35)

(Rev. 2012)

Page 2

8582. If the amount is not a passive activity deduc-

Line 16c. Amounts needed to claim the Enterprise

er’s pro rata share of any net income tax paid by the S

tion, include it on Form N-15, line 17. The maximum

Zone Tax Credit.—There should be attached to this

Corporation to a state which does not measure the in-

Hawaii deduction is $25,000.

Schedule K-1 a copy of Form N-756A showing your

come of S corporation shareholders by the income of

share of the corporation’s amounts needed to claim

the S corporation. Include amount in Other State and

Line 13. Deductions related to portfolio income

the credit. If the form is not attached, contact your cor-

Foreign Tax Credit Worksheet in the Forms N-11 In-

(loss).—Amounts on line 13 are the expenses (oth-

poration as you will need to attach a copy of the form

structions or in the Form N-15 Instructions.

er than investment interest expense and section 212

to the Hawaii net income tax return you file in order to

expenses from a REMIC) paid or incurred to produce

Other

receive the credit. Figure your credit on Form N-756.

portfolio income. Generally, include the amounts in

Line 17. Property distributions.—Reduce the basis

the Worksheet A-6 - Miscellaneous Deductions in the

Line 16d. Hawaii Low-Income Housing Tax

of your stock in the corporation by the distributions on

Form N-11 Instructions or Worksheet PY-6 or NR-6

Credit.—Hawaii’s low-income housing tax credit is

line 17. If these distributions exceed the basis of your

in the Form N-15 Instructions. These deductions are

equal to 50% (30% for property placed in service prior

stock, the excess is treated as gain from the sale or

not taken into account in figuring your passive activi-

to July 1, 2005) of the federal credit for qualified build-

exchange of property and is reported in the Capital

ty loss for the year.

ings located in the State of Hawaii. Figure your cred-

Gain/Loss Worksheet in the Form N-15 Instructions.

it on Form N-586.

Line 14. Other deductions.—Amounts on line 14

Line 18. Tax exempt interest income.—Generally,

are other deductions not included on lines 11, 12, and

Note: You may apply this nonrefundable credit only

you must increase the basis of your stock in the cor-

13. The corporation should give you a description and

after all other credits except the High Technology In-

poration by the amount shown.

your share of each of the expense items. Include the

vestment Tax Credit have been applied against your

Line 19. Other tax exempt income.—Generally, you

amount of deduction on the applicable line of your re-

Hawaii income tax liability.

must increase the basis of your stock in the corpora-

turn. Refer to the federal Shareholder’s Instructions for

Line 16e. Credit for Employment of Vocational Re-

tion by the amount shown.

Schedule K-1 (Form 1120S) for more information.

habilitation Referrals.—Your share of the credit is

Line 20. Nondeductible expenses.—The nonde-

shown on this line. Refer to Form N-884 for further in-

Investment Interest

ductible expenses paid or incurred by the corporation

formation.

If the corporation paid or accrued interest on debts

are not deductible on your tax return. Generally, you

Lines 16f. Motion Picture, Digital Media and Film

properly allocable to investment property, the amount

must decrease the basis of your stock in the corpora-

Production Income Tax Credit.—Your share of the

of interest you are allowed to deduct may be limit-

tion by this amount.

this credit is shown on line 16f. Use Form N-340 to

ed. For more information and the special provisions

Line 21. Amount of loan repayments for “Loans

claim this credit.

that apply to investment interest expense, see Form

from Shareholders”.—If the line 21 payments are

Line 16g. High Technology Business Investment

N-158, Investment Interest Expense Deduction, and

made on indebtedness with a reduced basis, the re-

Tax Credit.—Your share of the High Technology Busi-

federal Publication 550, Investment Income and Ex-

payments result in income to you to the extent the re-

ness Investment Tax Credit is shown on line 16g. Use

penses.

payments are more than the adjusted basis of the

Form N-318 to claim this credit.

Line 15a. Interest expense on investment debts.—

loan.

Line 16h. Credit for School Repair and Mainte-

Include the amount on Form 158 along with your in-

Lines 22. Adjustments.—Report your pro rata share

nance.—Your share of the Credit for School Repair

vestment interest expense from other sources to

of adjustments as applicable.

and Maintenance is shown on line 16h. Use Form

determine how much of your total investment interest

Line 23. Interest penalty on early withdrawal of

N-330 to claim this credit.

is deductible.

savings.—The amount of line 23 is included on the

Line 16i. Ethanol Facility Tax Credit.—Attach a

Lines 15b(1) and 15b(2). Investment income and

“Other adjustments” line of the Hawaii Subtractions

copy of this Schedule K-1 to the Hawaii net income

investment expenses.—Use the amounts on these

Worksheet of the N-11 Instructions (attach an expla-

tax return you file to substantiate the amount of your

lines to determine the amount to enter on line 1 of

nation to Form N-11).

share of the credit. Enter your share of this credit on

Form N-158.

Recapture of Tax Credits

Form N-324, line 13.

Caution: The amounts shown on lines 15b(1) and

Line 24. Recapture of Hawaii Low-Income Housing

Line 16j. Renewable Energy Technologies Income

15b(2) include only investment income and expens-

Tax Credit.—Report your pro rata share of recapture

Tax Credit.—There should be attached to this Sched-

es reported on lines 4, 5, 6, and 13 of this Sched-

of the Hawaii Low-Income Housing Tax Credit from

ule K-1 a copy of Form N-342A. If the form is not at-

ule K-1. If applicable, the corporation will have listed in

section 42(j)(5) partnerships and other sources. Com-

tached, contact your corporation as you will need to

the line 29 Supplemental Information section any oth-

plete Form N-586. See Form N-587, Low-Income

attach a copy of the form to the Hawaii net income tax

er items of investment income and expenses report-

Housing Credit Disposition Bond, for an alternative to

return you file in order to receive the credit. Use Form

ed elsewhere on this Schedule K-1. Be sure to take

credit recapture.

N-342 to claim this credit.

these amounts into account, along with the amounts

Line 25. Capital Goods Excise Tax Credit

on lines 15b(1) and 15b(2) and your investment in-

Line 16k. Important Agricultural Land Qualified

Properties.—You should receive a completed copy

come and expenses from other sources when figuring

Agricultural Cost Tax Credit.—Figure your credit on

of Form N-312, Part II from the corporation. Use this

the amount to enter on line 1 of Form N-158.

Form N-344.

information to determine the amount of credit recap-

Line 16l. Credit for Hawaii income tax withheld on

Credits

ture on Form N-312.

Form N-288.—If there is an amount on line 16l, in-

All filers should complete the appropriate forms to

Line 26. Recapture of High Technology Business

clude this amount on Schedule CR, line 21a and at-

claim their pro rata share of credits. Also attach a

Investment Tax Credit.—Report your pro rata share

tach a copy of this Schedule K-1 to your Form N-11

copy of this Schedule K-1 to the Hawaii net in-

of recapture of the High Technology Business Invest-

or Form N-15.

come tax return you file to support your credit.

ment Tax Credit on Form N-318.

Line 16m. Credit for Hawaii income tax withheld

Line 27. Recapture of the Tax Credit for Flood

on Form N-4 (Nonresident shareholders only).—

Line 16a. Fuel Tax Credit for Commercial Fishers.—

Victims.—Report your pro rata share of recapture of

If there is an amount on line 16m, include this amount

Figure your credit on Form N-163.

the Tax Credit for Flood Victims on Form N-338.

on Form N-15, line 53.

Line 16b. Total cost of qualifying property for the

Line 28. Recapture of Important Agricultural Land

Line 16n. Pro rata share of net income tax paid

Capital Goods Excise Tax Credit.—Figure your

Qualified Agricultural Cost Tax Credit.—Report

(Resident and part-year resident shareholders

credit on Form N-312. See Form N-312 and Tax Infor-

your pro rata share of recapture of the Important Ag-

only).—A resident or a part-year resident sharehold-

mation Release No. 2001-4 for additional information.

ricultural Land Qualified Agricultural Cost Tax Cred-

er shall be considered to have paid a tax imposed on

it on Form N-344.

the shareholder in an amount equal to the sharehold-

Shareholder'S Instructions For Schedule K-1 (Form N-35) Page 2

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