Apportioning State Partnership Income on 1065

[CPAAlly]

I am trying to apportion state income for a MFJ couple who moved from VA to NC mid year. I can't find an apportionment schedule on either state's forms.

When calling tech support, response was to override each states income (starting point) or just allocate it to the correct states on the 1040 and use the last state of residence for the 1065. Neither of these solutions is acceptable to me.

[dascpa]

Assuming the income is only reportable in their resident state (and not in any other states associated with the K-1 - see K-1 attachments) then use the part-year calculation pages from the bottom of the Federal Information Worksheet. Note, not all states carryforward this amount to the states so you may have to enter it directly onto the state returns.  In most cases using the number of days of residency in each state would be an acceptable apportionment.

[CPAAlly]

Thank you for the reply, but the issue I'm trying to resolve is apportioning the income at the partnership level, not on their 1040. I am familiar with that allocation but am unpleasantly surprised that there is no such allocation on a 1065 return.

[dascpa]

Your original post did not mention anything about partnership level.

Now you have multiple issues. You're saying the partnership or LLC moved from one state to another. Did the entity set up to do business in the new state? Did you close the entity with the first state?

Where are it's operations? If only in the first state there is no apportionment at the partnership level. If both states now you have to prepare two state tax returns for the 1065 and apportion income from each, unless those states have their own apportionment rules.  

For example, in Virginia I have had to use the below:

What is the standard Virginia apportionment formula?
The Virginia taxable income of a corporation is apportioned to Virginia by use of a double-weighted sales factor apportionment formula. ( Sec. 58.1-408, Code) Under the double-weighted sales factor formula, the total of the property factor, payroll factor, and two times the sales factor is divided by four. The denominator is reduced by two if the sales factor does not exist and by one for each other factor that does not exist.

[sjrcpa]

There has to be a place for Apportionment in the 1065 software.

I don't use ProSeries so can't tell you where it is.

[dascpa]

We wish there was. The apportionment comes from the filing of the state partnership returns.

[CPAAlly]

my apologies, the "1065" was in the title of the post and not in the details.

responding to your questions:

You're saying the partnership or LLC moved from one state to another. Did the entity set up to do business in the new state? Did you close the entity with the first state? yes, yes and yes

operations moved with the owners mid-2025 as this is a service based business

I realize I need to handle the apportionment at the state partnership level but cannot find the forms in ProSeries to do so. I looked at the VA Form 502A and it didn't seem to apply at first but upon reading the instructions I think it might. Is that what you use for this purpose?

[sjrcpa]

For VA yes. Each state has a similar form or schedule for apportionment.