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,
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.)