Pa Schedule M, Reconciliation Of Federal Taxable Income To Pa Taxable Income Instructions (Page 2 of 5) in pdf

Revised February 4, 2002

If the upper tier pass through entity filed a PA-20S/PA-65 Information Return and provided for an allocation of

interest, dividends, and gains in arriving at Net Income from Business, Profession, or Farm on the PA Schedule

RK-1 and/or PA Schedule NRK-1, submit a copy of the PA Schedule RK-1 and/or PA Schedule NRK-1. In this

case, the presumption is that the amounts included on the PA Schedule RK-1 and/or PA Schedule NRK-1

includes allocated interest, dividends, and gain in arriving at Line 1 of that PA schedule for Net Income from a

Business, Profession, or Farm.

Otherwise, the respective amounts of allocated interest, dividends, and gains should be enumerated on

Schedule M, Line 7. Submit a copy of the Schedule M from the other pass through entity.

See the Instructions for Line 7 Other PA Taxable Income from statement.

Part B – Add income that is taxable for PA PIT purposes, but not taxable for Federal Income Tax purposes

Lines 1 through 6

Enter on each line any income that the business did not report on its Federal Information Return, but must

report as taxable income under PA law.

Line 7. Other PA taxable income from statement

Enter the amounts for any income items not listed above. Submit a schedule, with supporting documentation,

describing each income item entered. Include by classification interest and dividends based on working capital

and allocated gains. Follow the instructions for allocating gains.

Include by classification the following:

•

Allocable interest to generate working capital

•

Allocable dividends to generate working capital

•

Allocable gains in determining Net Profits from a Business, Profession or Farm

Pass Through Income from Another Pass Through Entity

The PA S corporation or partnership should enter pass through interest or dividend income from investments to

generate working capital and interest that it used in operating its commercial activities and allocated gains

when determining its Net Profit or loss from Business, Profession or Farm activities.

If the upper tier pass through entity filed a PA-20S/PA 65 Information Return and provided for an allocation of

interest, dividends, and gains in arriving at the information on the PA Schedule RK-1 and/or PA Schedule NRK-

1, submit a copy of the PA Schedule RK-1 and/or PA Schedule NRK-1. In this case, the presumption is that

the amounts included on the PA Schedule RK-1 and/or PA Schedule NRK-1 includes allocated interest,

dividends, and gain in arriving at line 1 of that PA schedule.

Otherwise, the respective amounts should be enumerated on Schedule M, Line 7. Include by classification the

following, if not previously allocated by the PA S corporation or partnership:

•

Allocable interest to generate working capital from pass through entities

•

Allocable dividends to generate working capital from pass through entities

•

Allocable gains from pass through entities in determining Net Profits from a Business, Profession, or Farm.

See the Instructions for each income class.

Line B. Add Lines 1 through 7

Part C – Subtract income that is taxable for Federal Income Tax Purposes, but not taxable for PA PIT

purposes

Lines 1 through 3

Enter on each line any income that the business reported on its Federal Information Return, but does not have

to report as taxable income under PA law.

Revised February 4, 2002

Pa Schedule M, Reconciliation Of Federal Taxable Income To Pa Taxable Income Instructions Page 2

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