Form I-335 - Active Trade Or Business Income Reduced Rate Computation (Page 6 of 8) in pdf

Line 2c. Line 2a minus line 2b.

Line 3 Totals after adjustments. If the adjustment in line 2c is positive, add lines 1c and 2c. If the adjustment in line 2c is

negative, subtract line 2c from line 1c. Do not proceed if the result is zero or negative because that means you have no

income to be taxed at the flat rate and that all your income will be taxed at the graduated rate.

Line 4 Amounts reasonably related to personal services.

Enter amounts reasonably related to personal services of the taxpayer, the taxpayer's spouse, and any person claimed as

a dependent on the taxpayer's income tax return. Do not include amounts from W-2s or guaranteed payments for

personal services. See SC Revenue Ruling #08-2 or superseding advisory opinion for more information.

If you qualify and choose to use the Safe Harbor, you may use 50% of your qualifying income as being not reasonably

related to personal services instead of identifying the actual amount related to personal services. See the Rules for Using

Safe Harbor below.

Check the box if you elect to use the Safe Harbor.

Line 5 Active trade or business income deduction.

Subtract line 4 from line 3 and enter on line 5. If the amount is greater than zero, enter the amount as a deduction on the

appropriate line on SC1040, Schedule NR, or SC1041, whichever applies. Do not proceed if the result is zero or negative

because that means you have no income to be taxed at the flat rate and that all your income will be taxed at the

graduated rate.

Line 6 Active trade or business income tax rate. The flat tax rate on active trade or business income is 3%.

Line 7 Active trade or business income tax. Multiply the amount on line 5 by the tax rate on line 6. Enter on line 7 and on

SC1040, line 8, or on SC1041, Part I, Line 9.

INSTRUCTIONS FOR WORKSHEET 1 PASS-THROUGH INCOME FROM A SOLE PROPIETORSHIP

See instructions for I-335A.

INSTRUCTIONS FOR WORKSHEET 2 PASS-THROUGH INCOME FROM A PARTNERSHIP OR S CORPORATION

Enter amounts from K-1 in Column A. Enter amounts from SCK-1 in Column B. Do not enter in Column C any capital

gains or losses or passive investment income or losses.

Line 1 Ordinary business income (loss).

In Column C, enter amounts from Column B that are not capital gains or losses or passive investment income or losses.

Lines 2 and 3

Net rental real estate income (loss)/other net rental income (loss).

In Column C, enter from Column B only rental income derived in the active trade or business of renting property if, based

on all the facts and circumstances, the pass-through business either provides significant services or incurs substantial

costs in the rental business. The determination is based in part on the number of persons employed to provide services

and the types and amounts of expenses incurred other than depreciation. Examples of qualifying rents are those from

operating a hotel or a short-term car rental business. See IRC section 1362(d) and applicable regulations.

Line 4 Guaranteed payments (from partnerships).

In Column C, enter Column B guaranteed payments for use of capital that are not passive investment income. Do not

enter in Column C guaranteed payments for services.

Line 5 Interest income.

Generally interest income is not included in Column C. But in Column C, enter Column B interest income on obligations

acquired from sale of stock in trade, inventory, or property held primarily for sale to customers or from performance of

services in the ordinary course of a trade or business of selling the property or performing the services.

Form I-335 - Active Trade Or Business Income Reduced Rate Computation Page 6