Form Ic-156 - Shareholder'S Instructions For 1998 Schedule 5k-1 printable pdf download

Shareholder’s Instructions for 1998 Schedule 5K-1

General Instructions

Errors — If you believe the corporation has made an error on your

Schedule 5K-1, notify the corporation and ask for a corrected Schedule

Item to Note — A tax-option (S) corporation may pass through to its

5K-1. Don’t change any items on your copy. Be sure that the corpora-

shareholders manufacturer’s sales tax credits computed for taxable

tion sends a copy of the corrected Schedule 5K-1 to the Wisconsin

years beginning on or after January 1, 1998. The credit may offset only

Department of Revenue.

the Wisconsin income tax imposed on a shareholder’s pro rata share of

the corporation’s net income.

Elections — Generally, the corporation decides how to figure taxable

income from its operations. For example, it chooses the accounting

Purpose of Schedule 5K-1 — Similar to federal Schedule K-1, the

method and depreciation methods it will use. However, certain

corporation uses Schedule 5K-1 to report your pro rata share of the cor-

elections are made by you separately on your income tax return and not

poration’s income, deductions, credits, etc., for Wisconsin purposes.

by the corporation. These include elections made under Internal

Please keep it for your records. Do not file it with your tax return

Revenue Code section 59(e), relating to the deduction of certain

unless you are claiming a tax credit passed through from the corpora-

qualified expenditures ratably over the period of time specified in that

tion.

section (see lines 15a and 15b).

Although the corporation may have to pay a built-in gains tax, a

Limitations on Losses, Deductions, and Credits

franchise tax measured by certain federal, state, and municipal

government interest income, and a temporary recycling surcharge, you,

Aggregate Losses and Deductions Limited to Basis of Stock and

the shareholder, are liable for Wisconsin income tax on your share of

Debt — Generally, the deduction for your share of aggregate losses

the corporation’s income, whether or not distributed, and you must

and deductions reported on Schedule 5K-1 is limited to the basis of

include your share on your Wisconsin income tax return if a return is

your stock and debt owed to you by the corporation. The basis of your

required.

stock is figured at year end. The basis of loans to the corporation is the

balance the corporation now owes you, less any reduction for losses in

Use these instructions to help you report the items shown on Schedule

a prior year. Any loss not allowed for the taxable year because of this

5K-1 on your Wisconsin income tax return.

limitation is available for indefinite carryover, limited to the basis of

your stock and debt, in each subsequent taxable year.

Basis of Your Stock — You are responsible for maintaining records

to show the computation of the basis of your stock in the corporation

At-Risk Limitations — For federal purposes, if you have (1) a loss or

for Wisconsin income tax purposes. Schedule 5K-1 provides infor-

other deduction from any activity carried on by the corporation as a

mation to help you make the computation at the end of each corporate

trade or business or for the production of income, and (2) amounts in

taxable year. The Wisconsin basis of your stock (generally, its cost) is

the activity for which you aren’t at risk, you generally will have to

adjusted as follows (this list is not all-inclusive):

figure the allowable loss. The at-risk rules generally limit the amount

of loss (including loss on disposition of assets) and other deductions

Basis is first increased by:

(such as the section 179 expense deduction) that you can claim to the

amount you could actually lose in the activity. The at-risk rules also

•

All income (including tax-exempt income), as computed under

Wisconsin law, reported on Schedule 5K-1.

apply for Wisconsin purposes.

Note: You must report the taxable income on your Wisconsin

Passive Activity Limitations — Internal Revenue Code section 469

income tax return (if you are required to file a return) for it to

provides rules that limit the deduction of certain losses. The rules apply

increase your basis.

to shareholders who are individuals, estates, or trusts and have a

passive activity loss. Passive activities include trade or business

Basis is decreased, but not below zero, by:

activities in which you don’t materially participate and rental activities,

•

Property distributions, including cash, made by the corporation,

as defined in the federal regulations. Rental real estate activities in

reported on Schedule 5K-1, line 19, that are not includable in

which you materially participated are not passive activities if you meet

income. (Distributions in excess of Wisconsin basis reported on

certain eligibility requirements. The corporation will identify separately

Schedule 5K-1, line 19, and dividend distributions reported on

each activity that may be passive to you. You must determine whether

Schedule 5K-1, line 20, don’t decrease basis.)

your losses are limited by the passive activity rules.

•

Nondeductible expenses, as computed under Wisconsin law.

•

All deductible losses and deductions, as computed under Wisconsin

The passive activity loss limits also apply for Wisconsin purposes.

law, reported on Schedule 5K-1.

However, if there are differences between your federal and Wisconsin

Note: You may elect to decrease your basis by deductible losses

income, you may have to recompute the amount of passive activity loss

and deductions prior to decreasing your basis by nondeductible

deductible for Wisconsin.

expenses. If you make this election, any nondeductible expenses

that exceed the basis of your stock and debt owed to you by the

There are three types of differences between federal and Wisconsin

corporation are treated as nondeductible expenses for the following

income: Schedule I adjustments, those resulting from making different

taxable year. To make the election, attach a statement to your

elections for federal and Wisconsin purposes, and modifications to

timely-filed original or amended return, as provided in the federal

federal adjusted gross income prescribed in section 71.05(6) to (12),

regulations. Once made, the election applies to the year for which

(19), and (20), Wisconsin Statutes.

it is made and all future taxable years for that corporation, unless

the department agrees to revoke your election.

A Schedule I adjustment may arise if a provision of the Internal

Revenue Code doesn’t apply for Wisconsin or if a federal law change

•

Your share of the supplement to the federal historic rehabilitation

becomes effective at a different time than for federal purposes.

tax credit computed.

Modifications to federal adjusted gross income include the addition of

state and local government bond interest income and the subtraction of

Note: When figuring the Wisconsin basis in stock of a multistate

the 60% capital gain deduction.

corporation, use your share of the total company amounts, as computed

under Wisconsin law, rather than the income, losses, and deductions

For differences resulting from Schedule I adjustments or different

attributable to Wisconsin activities.

elections, you must recompute the passive activity loss limits for

Wisconsin. However, you may not recompute the loss limits for

Inconsistent Treatment of Items — Generally, you must report tax-

modifications.

option items shown on your Schedule 5K-1 (and any attached

schedules) the same way that the corporation treated the items on its

return. If your treatment is (or may be) inconsistent with the corpora-

Specific Instructions

tion’s treatment, attach a statement to your return to identify and

explain any inconsistency.

Name, Address, and Identifying Number — Your name, address, and

identifying number, the corporation’s name, address, and federal em-

IC-156

Form Ic-156 - Shareholder'S Instructions For 1998 Schedule 5k-1

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