Discussion:North Carolina S corp
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Discussion Forum Index --> Tax Questions --> North Carolina S corp
| 15 February 2009 | |
| I am a CA preparer crawling my way through North Carolina...This is the first year that my client has filed in NC. It is a 2007 S corp with a fiscal year end in 2008.
1. We are including the shareholders in the nonresident composite return that is included in the CD-401S. I noticed that Lacerte is not giving them any benefit of the Sec 179 deduction - no $ for $ reduction of their taxable income, no adjustment to regular depreciation (which is what I would expect if Sec 179 is not allowed). I see the discussion where taxpayers are allowed to deduct Sec 179 from 2002 - 2004 in 5 equal installments (n/a to us since the corp wasn't in NC at the time). I don't see any discussion of what is happening to this year's expense. 2. The form specifies that the Sch M-1 calc is based upon NC AAA. Yet the instructions provide almost no direction or clarification. Can I pick up the federal AAA as my starting point? As always, thank you for any help. | |
Southparkcpa (talk|edits) said: | 15 February 2009 |
| JAD
I live and practice in NC. I of course have never done a composite for NC as I am here. I can tell you that your concerns are justified and I asked the same question in 1997 when I opened my practice here, My software does the same thing even for residents. That is, it shows a NC K1 with NO 179 deduction and that is for residents. The starting point for NC taxable income is federal taxable income and NC allows 179 , the K1 is simply awkward. You will have add backs for the "special depreciation" this year. | |
Taxman3132 (talk|edits) said: | 15 February 2009 |
| Does NC charge a flow thru tax for non residents? the reason i ask is because Virginia now calculates a tax for non residents(first year).
maryland has been doing it for a few years. | |
| 24 March 2009 | |
| JAD - did you determine sec 179 was an additional deduction from federal taxable income on NC K-1? I am working on a partnership and the non-resident partners are assessed tax since there is no Sec 179 deduction. As you stated, instructions for NC are vague. I have elected out of bonus this year so that is not an issue. Thanks. | |
| 24 March 2009 | |
| The starting point for NC income is federal taxable income. The Sec. 179 is already deducted, if allowed, on the federal return, so no adjustment necessary. If you have any bonus depreciation, you need to add back 85% of the amount taken on the federal return. Also, the allowable depreciation deduction taken over 5 years, is not sec. 179, but bonus depreciation taken on the federal return, that was added back on 2003-2004 NC tax return. | |
| 24 March 2009 | |
| Dnc0716 - it appears that North Carolina starting point on the partnership return is Federal ordinary income which does not take Sec 179 into account. Am I missing something? | |
| 24 March 2009 | |
| The Sec. 179 is deductible on the parnters' level. So the withholding is based on the ordinary income from the 1065 +- any adjustments (bonus depreciation, etc..) and once the taxpayer files a personal non-resident return, the sec 179 that was claimed on the federal return will be claimed on the states applicable share of income, and a refund of withholding is possible. | |
