2023 Pass-Through Entity S corporation Example

Based on information from Acme Inc.'s federal Form 1120S, Line 1 on Schedule PTE is $80,000. Line 4 is $8,000 based on amounts reported on Bob and Sara's Schedules KPI. 

Acme Inc's Minnesota apportionment percentage is 85% and entered on line 6.

Line 8 is determined at the entity level without regard to the shareholder’s state of residency.

Line 15 is the sum of the shareholders’ distributive share percentage for those shareholders not satisfying their Minnesota income tax obligation with PTE. Sara’s Minnesota filing requirement is being fulfilled by the entity’s filing Schedule PTE.

Lines 16 and 17 allow subtractions for a portion of Section 179 and federal bonus depreciation that was added back in a year these specific shareholders elected to be included in this entity’s composite return. These lines only apply to shareholders that:

• Have the current year Schedule PTE fulfill their filing obligation
• Have elected composite tax in a prior year in which an addition for Sect. 179 or federal bonus depreciation was required

The Schedule PTE is fulfilling Sara’s filing requirement and she elected composite in a year during which a Section 179 addition attributable to her was required.

Lines 22 to 27 are used to calculate the PTE tax attributable to shareholders electing to have Schedule PTE fulfill their filing requirement. 

The total PTE tax amount is reported on line 29. This is the sum of the PTE tax attributable to owners for whom Schedule PTE does not fulfill their filing requirement (Line 21), and the PTE tax attributable to owners for whom Schedule PTE does fulfill their filing requirement (Line 27). This amount flows to the M8 and is paid by the entity.

This portion of the schedule is completed with Bob and Sara’s personal information. This information should match Schedules KS for all shareholders.

Bob’s share of tax is from Line 21 of Part 1 of Schedule PTE.

Sara’s share of tax is from Line 27 of Part 1 of Schedule PTE.

Bob’s credit amount from the credit distribution on Schedule PTE flows to Schedule KS, Line 30. The box on line 30 is not checked on his Schedule KS. Bob is not eligible to have Schedule PTE fulfill his filing requirement because he is a resident of Minnesota.

Sara’s credit amount from the credit distribution on Schedule PTE flows to Schedule KS, Line 30. The box on line 30 is checked on her Schedule KS, because she is a non-resident and is having Schedule PTE fulfill her filing requirement.