Brain Dead - Need help with NR state allocation

[jasdlm]

Client is 85% owner in a firm in another state.  Works remotely and never visits the State.  S Corp.  W2 income on resident state, K1 loss (in this case) on Non-Resident state because that's technically the situs of the firm.  The question:  Client has a distribution in excess of basis of $30k.  (Has been going on for several years - I know, I know).  I think the income is resident state income, and that's the way the prior preparer handled it, but now I'm questioning myself.  ATX flowed through to NR state because it came from the K1 entry, but I'm not certain that means anything.

I'm sending myself in circles on this.  Ridiculous.  Apologies for asking a question I should know the answer to.

[Abby Normal]

That's a good question. I guess I'd see what the other state says about S corp distributions, but my inclination is to go with resident state, like the W2 does.

[jklcpa]

Without researching, I'd say that this isn't any sort of apportionable item or a corporate-level item that can be attributable to nexus in the client's nonresident state, but rather is a shareholder level gain based on individual's basis. There are a few states that tried to impose a tax on similar gains from partnerships (distribs in excess of outside basis) for partners (CA, ID, NJ, OR), but not KS as far as I know.  I would treat this as taxable to the resident state.

What is the nonresident state?

[jasdlm]

Thanks so much to both of you!  Non-resident state is PA.

[BulldogTom]

I agree with @jklcpa.   I am wondering how you are going to do that in ATX?   My first thought is to use the State K-1 Worksheet and override.   Is that how you would do the entry? 

I don't have anyone in this situation, just filling up my brain with some extra information that I can forget later and know that I knew it before.

Tom
Longview, TX

[jklcpa]

PA has its own sch K-1s for either resident or nonresident partners or shareholders.

Do you have a PA NRK-1 ("NR" meaning nonresident)?  The PA return should back out the federal information and pick up the activity reported on the state NRK-1.

Hope this helps.