Form Ct-1065 - Connecticut Partnership Income Tax Return And Instructions

Schedule E - Computation of

special allocations are subject to review by the

Commissioner of Revenue Services.

Connecticut Source Income

The character of the income (loss) for Connecticut

Complete Schedule E for each partner that is a resident

purposes must mirror the character of such income

trust or estate; a nonresident individual, trust, or estate;

(loss) on the federal return.

a partnership; or an S corporation.

Clearly indicate a loss by using parentheses ( ).

A partnership that maintains books and records that

satisfactorily disclose the portion of its income, gain,

Line 1 - Ordinary Income (Loss) From Trade or

loss, or deduction derived from or connected with

Business Activities

Connecticut sources must enter the amount of each

Enter the Connecticut portion of the amount of each

nonresident partner's distributive share of partnership

partner’s distributive share of the ordinary income (loss)

items derived from or connected with Connecticut

from the trade or business activities of the partnership.

sources as determined from those books and records.

Unless the partnership maintains books and records that

The portion of the partnership's income, gain, loss, or

satisfactorily disclose the portion of income, gain, loss,

deduction that is derived from or connected with

or deduction derived from or connected with Connecticut

Connecticut sources (as determined from the

sources, this amount is calculated by multiplying the

partnership's books and records) will be multiplied by

partner's ordinary income (loss) from the trade or

the partner’s distributive share (%) of that income, gain,

business from the partner's federal Form 1065, Schedule

loss, or deduction.

K-1, by the apportionment fraction on Schedule B,

A partnership that does not maintain books and records

Line 8.

that satisfactorily disclose the portion of income, gain,

Line 2 and Line 3 - Net Income (Loss)

loss, or deduction derived from or connected with

Connecticut sources must use the apportionment

Enter the Connecticut portion of the amount of each

fraction computed on Schedule B, Line 8, or an

partner's distributive share attributable to rental activities.

authorized alternate method, to determine the portion

Amounts attributable to real property located in

of each nonresident partner's distributive share of any

Connecticut are 100% taxable to a nonresident partner

item that is derived from or connected with Connecticut

for Connecticut income tax purposes. Amounts

sources. This is accomplished by multiplying federal

attributable to real property located outside Connecticut

Form 1065, Schedule K-1 distributive share amounts

are not taxable to a nonresident partner for Connecticut

for each partner by the apportionment fraction as

income tax purposes.

reported on Schedule B, Line 8, and entering the result

on Schedule E.

Line 4 - Portfolio Income (Loss)

Enter the Connecticut portion of the amount of each

The amounts entered for a partner on Schedule E should

include the Connecticut modifications reported for the

partner's distributive share of portfolio income (loss).

Items of income, gain, loss, and deduction derived from

partner on Schedule D to the extent those modifications

are derived from or connected with Connecticut sources.

or connected with Connecticut sources do not include

such items attributable to intangible personal property

Special limitations on partnership agreements: If a

except to the extent such intangible property is employed

partnership agreement provides for a special allocation

in a business, trade, profession, or occupation carried

among the partners of any item of partnership income,

on in Connecticut. For example, dividends from stock

gain, loss, or deduction, federal income tax law requires

used as collateral to secure a business loan for a

that such a provision be disregarded for federal income

Connecticut business would be income from intangible

tax purposes, where its principal purpose is the avoidance

property employed in a Connecticut trade or business

or evasion of federal income tax. In such a case, each

and therefore would be taxable for Connecticut income

partner's distributive share of that item is determined by

tax purposes to a nonresident partner.

the partner's distributive share for federal income tax

purposes of the taxable income or loss of the partnership

Line 5 - Guaranteed Payments to Partners

as described in I.R.C. §702(a)(8). This treatment and

Enter the Connecticut portion of the amount of each

distribution of the item is reflected in each partner’s

partner's distributive share of guaranteed payments made

federal adjusted gross income and therefore, in each

to the partner. Unless the partnership maintained books

partner's Connecticut adjusted gross income, even

and records that satisfactorily disclose the portion of

though in a particular case no Connecticut income tax

income, gain, loss, or deduction derived from or

avoidance or evasion may be involved.

connected with Connecticut sources, this is calculated

In certain cases, however, a provision for special

by multiplying the amount of the partner's distributive

allocation does not have as its principal purpose the

share of guaranteed payments from federal Form 1065,

avoidance or evasion of federal income tax, but has as

Schedule K-1, by the apportionment fraction on

its principal purpose the avoidance or evasion of

Schedule B, Line 8.

Connecticut income tax. In such an instance, such

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Form Ct-1065 - Connecticut Partnership Income Tax Return And Instructions - 2003 Page 14

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