Form Tc-65 - Partnership/ Limited Liability Partnership/ Limited Liability Company - 2012 Page 5
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26Business income apportioned to Utah is subject to the
2. In determining Utah taxable income of a partner, any
pass-through entity withholding requirements.
modifi cation (such as U.S. government bond interest)
that relates to an item of the partnership income, gain,
loss or deduction shall be made in accordance with
Nonbusiness Income
the partner’s distributive share for federal income tax
purposes of the items to which the modifi cation re-
Nonbusiness income means all income other than
lates. Where a partner’s share of any such item is not
business income. See UC §59-7-302(1)(h).
required to be taken into account separately for federal
income tax purposes, the partner’s distributive share
Portfolio Income
of such item shall be determined in accordance with
his distributive share for federal income tax purposes
Portfolio income may be either business or nonbusi-
of partnership income or loss generally.
ness income.
3. Where a partner’s distributive share of an item
For purposes of pass-through entities, generally, portfo-
of partnership income, gain, loss or deduction is
lio income includes all gross income, other than income
determined for federal income tax purposes by a
derived in the ordinary course of a trade or business
special provision in the partnership agreement with
and Utah nonbusiness income taxable on the Utah
respect to such item, and where the principal pur-
return of a pass-through entity taxpayer.
pose of such provision is the avoidance or evasion
Portfolio income includes:
of tax, the partner’s distributive share of such item
and any modifi cation with respect thereto shall be
• interest;
determined as if the partnership agreement made
• dividends;
no special provision with respect to that item.
• royalties;
Nonresident or Part-year
• income from the disposition of property that produces
Resident Share of Partnership
income of a type defi ned as portfolio income;
Items
• income from the disposition of property held for
investment; and
1. In determining the adjusted gross income of a nonresi-
• income from a real estate investment trust, a regulated
dent partner of any partnership, there shall be included
investment company, a real estate mortgage invest-
only that part derived from or connected with sources
ment conduit, a common trust fund, a controlled foreign
in Utah of the partner’s distributive share of items of
corporation, a qualifi ed electing fund, or a cooperative.
partnership income, gain, loss or deduction entering
into the partner’s federal adjusted gross income. (The
Interest, dividends, royalties, etc., earned in the ordinary
Utah portion is shown alongside the total for each item
course of the trade or business of a pass-through entity
amount on the Utah Schedule K.)
are not portfolio income.
2. In determining the sources of a nonresident partner’s
Example: Interest and dividends may be considered
income, the following conditions apply.
portfolio income if the pass-through entity had funds that
were not used to further the trade or business and were
a. No consideration will be given to a provision in
invested and generated interest or dividends. Interest
the partnership agreement that characterizes
and dividends are not considered portfolio income if
payments to the partner as being for services
the entity’s primary business activity is investing funds,
or for the use of capital, or allocates to the
such as with a brokerage fi rm.
partner, as income or gain from sources outside
Utah, a greater portion of his distributive share
Portfolio income is attributable to the resident state.
of partnership income or gain than the ratio of
partnership income or gain from sources out-
Modifications
side Utah to partnership income or gain from
all sources, except as provided in 5 below.
Modifi cations may be needed to determine the Utah
taxable income of a partner. See Character of Part-
b. No consideration will be given to a provision in
nership Items and Nonresident or Part-year Resident
the partnership agreement that allocates to the
Share of Partnership Items below.
partner a greater portion of a partnership item,
loss or deduction connected with sources in Utah
than his proportionate share, for federal income
Character of
tax purposes, of partnership loss or deduction
Partnership Items
generally, except as provided in 5 below.
1. Each item of partnership income, gain, loss or deduc-
3. Any modifi cation (such as for U.S. government bond
tion has the same character for a partner as it has
interest) that relates to an item of partnership income,
for federal income tax purposes. When an item is not
gain, loss or deduction, shall be made in accordance
characterized for federal income tax purposes, it has
with the partner’s distributive share for federal income
the same character for a partner as if realized directly
tax purposes of the item to which the modifi cation
from the source realized by the partnership, or incurred
relates, but limited to the portion of such item derived
in the same manner as incurred by the partnership.
from or connected with sources in Utah.
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