103 KAR 16:210. Calculation of gross income for corporations that are pass-through entities and treatment of certain deductions for their individual members, partners, and share-holders

Link to law: http://www.lrc.ky.gov/kar/103/016/210.htm
Published: 2015

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      103 KAR 16:210. Calculation of gross

income for corporations that are pass-through entities and treatment of certain

deductions for their individual members, partners, and shareholders.

 

      RELATES TO: KRS 141.010, 141.020,

141.040, 141.050, 141.208, 141.420

STATUTORY AUTHORITY: KRS 131.130, 141.018,

141.050

      NECESSITY, FUNCTION, AND CONFORMITY: KRS

141.018 requires the department to promulgate administrative regulations

necessary to explain or implement Kentucky's tax laws. KRS 141.040 requires

pass-through entities (S-corporations, limited partnerships and limited

liability companies) that are doing business in this state, to compute gross

income for purposes of paying Kentucky corporation income tax. This

administrative regulation establishes for pass-through entities how gross

income is to be calculated. This administrative regulation also clarifies the

treatment of certain deductions by individual partners, members and

shareholders in limited liability pass-through entities in the computation of

taxable net income.

 

      Section 1. Gross income of those pass

through entities taxable as corporations as defined in KRS 141.010(24)(b) to

(h) shall be computed in a manner identical to that required for federal income

tax purposes except as otherwise provided in this administrative regulation.

 

      Section 2. Treatment of certain

deductions for individual members, partners and shareholders of corporations

defined in Section 1.

      (1) Individuals shall deduct their

distributive share of a corporation’s depreciation and expense deduction

allowed under Sections 168 and 179 of the Internal Revenue Code, 26 U.S.C. 168

and 179, to compute Kentucky adjusted gross income.

      (2) Individuals may deduct, subject to

the limitations of the Internal Revenue Code, their distributive share of

charitable contributions made by the corporation.

 

      Section 3. This administrative regulation

shall apply to taxable years beginning on or after January 1, 2005. (32 Ky.R.

1821; 33 Ky.R. 66; eff. 8-7-2006.)