Form I-335 - Active Trade Or Business Income Reduced Rate Computation (Page 5 of 8) in pdf

Purpose of I-335: I-335 identifies active trade or business income and calculates the optional flat tax rate imposed on

active trade or business income.

In order to use the flat tax rate on active trade or business income, an individual, estate or trust with pass-through income

from one or more sole proprietorships or single-member LLCs not taxed as a C corporation must complete one

Worksheet 1.

In order to use the flat tax rate on active trade or business income, an individual, estate or trust with pass-through income

from one or more partnerships, S corporations, or LLCs taxed as partnerships or S corporations must complete a separate

Worksheet 2 for each business.

Worksheets 1 and 2 identify pass-through income and remove passive investment income and expenses related to

passive investment, capital gains and losses, and guaranteed payments for personal services.

From the results of Worksheets 1 and 2, I-335 identifies active trade or business income or loss and calculates the

optional flat rate of tax.

I-335 instructions:

Before completing I-335, complete:

(a) one Worksheet 1 for all South Carolina pass-through income from Schedules C, C-EZ

and F; and

(b) one Worksheet 2 for each SCK-1.

Line 1 Totals from Worksheets.

Line 1a. Enter the total from line 3 of Worksheet 1.

Line 1b. Enter the total of all amounts from Worksheets 2, line 22, Column C.

Line 1c. Enter the total of lines 1a and 1b.

Line 2 Adjustments and deductible part of self-employment tax.

Line 2a. An adjustment may be required in determining the amount subject to the reduced rate. The adjustment may be

positive or negative.

An example of a positive adjustment is a current year South Carolina suspended loss flowing through from a pass-through

business that the taxpayer is not allowed to use because: (1) the taxpayer does not have basis, (2) the taxpayer does not

have sufficient at-risk amounts, or (3) the loss is a passive activity loss under IRC Section 469.

Examples of negative adjustments are (1) previously suspended losses from a pass-through business that the taxpayer is

now allowed to use because the taxpayer now has basis or is at risk, or (2) a net operating loss carryforward from

ownership of a sole proprietorship that the taxpayer may now use, if the losses carried forward are South Carolina active

trade or business losses.

Enter brackets around the adjustment on line 2a if the adjustment is a negative amount. Enter -0- on line 2a if no

adjustments are necessary.

Line 2b. The deductible part of self-employment tax is a business expense. Enter the amount from federal Form 1040

attributable to income from a partnership or LLC taxed as a partnership and related to South Carolina. Do not include the

amount already included on line 2 of Worksheet 1.

Form I-335 - Active Trade Or Business Income Reduced Rate Computation Page 5