Partnership with nonresidents for the state

[Wisconsin guy]

I have a partnership with four partners. The partnership if for ownership of a bar/tavern in Wisconsin. One of the four partners lives in WI and the other three are nonresidents of Wisconsin. One is a resident of Michigan and two are residents of Missouri. My question is on the state return. The profit or loss for the partnership is transferred to the WI partnership return. If the partnership has a loss, do the nonresident partners only get the WI loss if they have WI income? If the partnership has income, do the nonresidents have to report the income if it is less than the filing requirement?

thanks in advance

Wisconsin guy

[Bees Knees]

The federal return does not care what state the income or loss came from. You simply report it the same way you would report any other K-1 income or loss.

For state tax purposes, it dependents on the state. In general, a nonresident must file a return for the state the partnership does business in if the income is above the filing requirement. So for years where there is a profit, a nonresident WI return would be required if income exceeds WI nonresident filing requirements. The home state return may offer some kind of credit for any state taxes paid to another state. For a loss year, you don't care about the nonresident return because there is nothing to deduct the loss against, unless you have other nonresident income from that state.

[JoshinNC]

What about GP?

I have a similar situation where I had to file a nonresident return for a partner in a partnership with a loss.

Parnership is in NC, one of the partners is in NY. She took GP that exceeded her allocated loss, so the partnership, under state law, had to pay her nonresident tax for her.

We had to file a nonresident NC return for the partner.

Don't know that this would pertain to your situation, but my client was actually due an NC refund of about $30.

[John of PA]

NR Passive Losses

One point I would like to add here is that if the passthrough entity has passive loss carryforwards, you would then want to file a non resident reutrn, even if a loss, to establish the passive loss carryforwards for a future sale of the business or rental property. Of course, this does not apply if all partners are active members.