Califonia PTE elective tax

[ricklang99]

In the partnership program, I am assuming the Ca elective tax is reported under State taxes (for Federal tax purposes) in order to get a deduction on the Federal return, is this correct?

However, this basically allocates the State tax deduction (on Federal tax return) to all partners, even those partners that are not making the election to participate. Any help as to whether this is the correct way to report this deduction for Federal purposes? If so, are non elective partners also entitled to a Federal deduction, it seems off?

Appreciate any thoughts

Rick

[George4Tacks]

Screen 32 > For each partner there is an input Pass - Through Entity Elective Tax Calculation (Form 3804) with a yes/no and pro-rata [O] I think check this box as a yes (1) will trigger the calculation

I really have not played with how the program does this. Was the tax prepaid in 2021?

You may need to do a special allocation. 

[ricklang99]

Thanks George for the response.

Yes, the tax was prepaid on 12/30/21. I also had checked 'yes' on screen 32 and the elective tax calculation was computed correctly for all participating partners.

My issue is with the deduction on the Federal tax return and with a NON electing partner. The only place I can find to put this deduction is under 'State tax'. The lacerte program will then allocate income (which includes this deduction) based on partners % ownership, including allocating a portion of the deduction to the NON electing partner. This doesn't seem correct?

As you mentioned, the only way (this I can determine) to NOT have any of this deduction allocated to the non-electing partner is to do a special allocation. I was just wondering if other people had this issue and if a 'special allocation' was the only way to handle this.

Thanks again

[George4Tacks]

Let's suppose you have 4 partners and 3 elect to prepay $1,000 each. $3,000 was paid last year and allocated to those 3. That reduced the ending bank balance that is where it goes on the 1065. I believe it should also show as a distribution to those 3 partners. The 4th partner now will owe $Y on their state tax return when they file their 540. They can then take an $Y deduction on their Schedule A in the year they pay it. The 1065 has nothing to do with that. The partnership did not actually pay any tax. The partners paid the tax from partnership income. One elected not to do that, so they will pay from their income. 

Am I thinking correctly?