CA PTE, first time through with the detail

Technical topics regarding tax preparation.
#1
JAD  
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California
I am working through the CA PTE issue for the first time. I am working on an LLC with activity out of state. Two members are CA residents. Let’s assume all members have the same ownership and profits interests. The payment was made in 2022 for 2021 income.

1. Am I correct that we don’t have specific instructions as to how to document the member’s consent?

2. Lacerte is not showing the credit on the CA K-1. Perhaps it will be reported to each member on Form 3804-CR, as an attachment to the K-1? The FTB has not released that form. Or perhaps Lacerte simply has not addressed the issue yet. The CA K-1 is viewable on the screen, but not printable, indicating that Lacerte does not consider it final. Do we know the format for transmitting this information to the member?

3. The entity is accrual, but for federal purposes, we deduct the payment in 2022, the year paid. This is consistent with Notice 2020-75 and perhaps also with details of the CA law. The entity is not committed until the return is filed.

4. I’m trying to figure out how this works on the LLC’s books. Have we already been through this here? I am sorry if I missed that particular thread.

Let’s say the member’s share of 2021 income is $53,763. The payment made in 2022 is $5,000. Let’s say that the 12/31/20 capital account is $100,000.

100,000 capital account 12/31/20
53,763 income 2021
153,763 capital account 12/31/21

60,000 income 2022
(5,000) payment made 3/15/22 for 2021 income
(2,500) payment made 6/15/22 for 2022 income, to keep options open
206,263 capital account 12/31/22

The member’s federal income tax allocation for 2022 is $52,500. But the non-CA resident shareholder receives an income allocation of $60,000. This shareholder should receive a distribution of $7,500 to keep the economics fair and the capital accounts equal. This is where we arrive at the advice of the attorneys that all of the entity agreements must be amended to allow the special allocation of the deduction to the CA resident and the distribution to the non-CA resident, correct?

Fun times, thanks
 

#2
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WESTERN USA
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Lacerte is not showing the credit on the CA K-1. Perhaps it will be reported to each member on Form 3804-CR, as an attachment to the K-1? The FTB has not released that form. Or perhaps Lacerte simply has not addressed the issue yet. The CA K-1 is viewable on the screen, but not printable, indicating that Lacerte does not consider it final. Do we know the format for transmitting this information to the member?


Its still early in the forms, but Drake is showing a PTE credit on CA K-1 line 13d other credits. Also printing a Form 3804 credit calculation and shareholder allocation which attaches to 100-S.
Current problem is Drake is adding PTE to tax balance ok, but calculating an underpayment penalty on Form 5806, yikes!
 

#3
JAD  
Posts:
4022
Joined:
21-Apr-2014 8:58am
Location:
California
Thank you for the response. You are correct - it is there on the K-1. I was looking at the wrong member. :roll:

Lacerte is not calculating a penalty - hopefully Drake will fix soon. Thank you again.
 


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