Instructions For 2015 Schedule 4w: Wisconsin Subtractions From Federal Income printable pdf download

Instructions for 2015 Schedule 4W:

Wisconsin Subtractions from Federal Income

Purpose of Schedule 4W



If the transaction was entered on the advice of a

tax advisor, the advisor’s fee was determined by

Corporations complete Schedule 4W to report sub-

reference to the tax savings.

traction modifications that are needed to account for



differences between taxable income under Wisconsin

The related entity does not regularly engage in

law and under federal law. The corporation files

similar transactions with unrelated parties on

Schedule 4W with its Wisconsin Form 4.

terms substantially similar to those of the subject

transaction.

Line-by-Line Instructions



The transaction was not entered into at terms

comparable to arm’s length as determined by

■ Line 1. Wisconsin Subtraction Modification for

Treas. Reg. 1.482-1(b).

Dividends – Enter the total from line 4 of Sched-



ule 4Y. See the Schedule 4Y instructions for an expla-

There was no realistic expectation of profit from

nation of dividends that are eligible for the subtraction.

the transaction apart from the tax benefits.



The transaction resulted in improper matching of

■ Line 2. Related Entity Expenses – If the corpora-

income and expenses.

tion made an addition modification for related entity ex-



penses on Schedule 4V, line 3, this is where you report

An expense for the transaction was accrued under

the amount that qualifies for a deduction. Enter the

FIN 48.

amount of the expenses from Schedule 4V, line 3, that

are deductible using the criteria described in Condi-

The statutes (sec. 71.80(23)(a)1. and 2., Wis. Stats.)

tions for Deducting Related Entity Expenses, below.

provide some additional conditions under which a re-

lated entity expense may qualify for a deduction, sub-

For corporations that are partners, members, or bene-

ject to some important exceptions. Those conditions

ficiaries of pass-through entities, also include the

are:

amount of allowable related entity expense reported



on line 21b of Schedule 3K-1 and on line 14b of Sched-

If the expense was paid to a related entity that is

ule 2K-1, as applicable.

merely acting as a conduit between the taxpayer

and an unrelated entity, or

Conditions

for

Deducting

Entity



If the related entity was subject to a tax measured

Expenses. Section 71.80(23)(a)3., Wis. Stats.,

by net income or receipts and the net income or

provides that a related entity expense that was added

receipts of the transaction were included in its tax

back on Schedule 4V, line 3, qualifies for a deduction

base.

if all of the following conditions are met:



More Information on Related Entity Expenses. For

The primary motivation for the transaction was

more information on the deductibility of related entity

one or more business purposes other than the

expenses, see the Schedule RT instructions. Even if

avoidance or reduction of state income or fran-

you weren’t required to file Schedule RT for the ex-

chise taxes;

penses you added back on Schedule 4V, the instruc-



The transaction changed the economic position of

tions to Schedule RT provide helpful information re-

the taxpayer in a meaningful way apart from tax

garding deductibility of related entity expenses.

effects; and

■ Line 3. Income from Related Entities Whose Ex-



The expenses were paid, accrued, or incurred us-

penses Were Disallowed – If the corporation has in-

ing terms that reflect an arm’s length relationship.

come from a related entity which paid, accrued, or in-

curred expenses to the corporation, and that related

Factors that may indicate that the expense does not

entity could not deduct those expenses according to

qualify for a deduction include the following:

the instructions for line 2, the corporation may subtract



There was no actual transfer of funds from the tax-

the corresponding income from its taxable income.

payer to the related entity, or the funds were sub-

stantially returned to the taxpayer, either directly

or indirectly.

IC-124

Instructions For 2015 Schedule 4w: Wisconsin Subtractions From Federal Income

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