Reporting the Basis of Asset Modification for Pass-Through Entities and Their Members

Starting with the first taxable year beginning after December 31, 2013, and for each of the next 4 taxable years, a person must either add or subtract 20% of the difference between the combined federal adjusted bases and the combined Wisconsin adjusted bases of all depreciated or amortized assets as of the last day of the taxable year beginning in 2013 that are being depreciated or amortized for both federal and Wisconsin purposes.

For partnerships, the basis of asset modification must be reported in column c of Schedules 3K and 3K-1. In most cases it can be reported on line 1 or line 2 as an adjustment to ordinary business income or loss or net rental real estate income or loss. However, the basis modification may instead be reported on line 11 (other income or loss) or line 13d (other deductions).

For tax-option (S) corporations, the basis of asset modification must be reported in column c of Schedules 5K and 5K-1. In most cases it can be reported on line 1 or line 2 as an adjustment to ordinary business income or loss or net rental real estate income or loss. However, the basis modification may instead be reported on line 10 (other income or loss) or line 12d (other deductions).

Where should partners and shareholders report the basis modification passed through from a partnership or tax-option (S) corporation?

Form 1
Partners and shareholders that are individuals report the pass-through basis modification on Line 4 or 11 of Form 1 as an "other addition" or "other subtraction" (use code number 51 or 52). Do not report the basis modification on Wisconsin Schedule I.

Form 1NPR
Partners and shareholders that are nonresidents or part-year residents of Wisconsin report the pass-through basis modification on line 11 of Form 1NPR.

Form 2
Partners and shareholders that are trusts, estates, or other fiduciaries report the pass-through basis modification on Schedule A, line 5 or line 11.

Form 3
Partners that are partnerships report the pass-through basis modification on column (c) of Schedules 3K and 3K-1 as described above.

Form 4
Partners that are corporations report the pass-through basis modification on Schedule 4V, line 7 or Schedule 4W, line 9.

Form 5S
Partners that are tax-option (S) corporations report the pass-through basis modification on column (c) of Schedules 5K and 5K-1 as described above.

Form 6
Partners that are corporations in a combined group report the pass-through basis modification on Part II, line 2 or Part II line 4i.

February 13, 2015