SC Preparers

[Chief]

I have a client who is a NR of SC but has several 6252's installments sales on properties located in SC. For 2005 there has been no problem; the income from these properties have been included on SC returns as SC income.

The problem lies with his 2004 returns. I filed an amended federal return. Capital losses on Sch D completely wiped out his SC income. Is there a need to file a SC return for him. None was filed nor was a state amended return filed.

I guess my question is does he have SC income when all of that income was wiped out by capital losses on the federal Sch D?

[Snaggletooth]

I would file

Chief, I would file SC for 2004. Here are my reasons:

1. I believe there may be a requirement for filing, as the minimum would probably apply to the proceeds of sales rather than whether there is a gain or loss.
2. If you are filing installment sales for 2005, one of the lines asks for principal payments received in previous years. If anyone in SC Revenue Dept reconciles these things (and that is questionable), then they will be missing a year.
3. South Carolina just might allow a carryforward of a capital loss, if the loss was incurred in SC. In my opinion, this is a long shot, but it is possible.
4. The capital loss in 2004 could be a net of several gains and losses. There may be some advantage into splitting these into SC gains/losses, and non-SC gains/losses.

Maybe I'm giving too much credit to the data-matching programs in SC tax department, as if some of the above may be caught or questioned. But then again, you never know.

[Snaggletooth]

Resurrect

...going to resurrect this thread. I thought it was a good question Chief, and surprised no one else has commented.

Discussion threads come and go very quickly in the heat of tax season. Notice how many threads get only one response, or even no response at all! Not many people have time to read them all, and I'm very much that way myself.

[Chief]

SC Return 2004

Thanks, Snag. I went back and did a federal 1040X for this client, and then attached it to the NR return for SC along with a copy of the corrected Sch D. He still had a tax liability of $7.00 for SC. I have no idea what penalty they will apply for filing in the first place. However, we did file the 2005 returns on time by efiling them. Your suggestions were helpful.
Looking forward to making a pit stop in Manchester on the way to Michigan in May.

[Brian EA]

Thanks, Snag. I went back and did a federal 1040X for this client, and then attached it to the NR return for SC along with a copy of the corrected Sch D. He still had a tax liability of $7.00 for SC. I have no idea what penalty they will apply for filing in the first place. However, we did file the 2005 returns on time by efiling them. Your suggestions were helpful.
Looking forward to making a pit stop in Manchester on the way to Michigan in May.

Send them $10.00