We provide here a written summary of answers provided by the Department of Revenue to the committee at periodic question and answer sessions. These documents are classified as Revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on a specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.

Q&A with the Pennsylvania Department of Revenue

How should PA-40 non-resident sellers (individual shareholder) of a PA S Corp present the gain from the sale of stock to the buyer when an IRC 338(h)(10) election has been made?

Nov 15, 2019
Q:

How should PA-40 non-resident sellers (individual shareholder) of a PA S Corp present the gain from the sale of stock to the buyer when an IRC 338(h)(10) election has been made? For example, the PA S Corp return, Page 2, Part IV, Line 10 Total Income $25,000, Line 11 Total Reportable Income $5,000, Line 12 Total non-Taxable/non-reportable Income $20,000 (the IRC 338h10 portion). How should this be presented on the PA-40 to assure proper processing and avoid additional correspondence with the Department?
 
A:

It would seem based on the above facts, the Information Return was prepared correctly, and therefore, the gain would not be included in the NRK1. If the non-resident shareholder seller reports the income as shown on the NRK1 there should not be an issue. If there is a specific case where there is an issue, please contact our office to discuss.
 

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These documents provide a summary of the answers provided by the Department of Revenue to the PICPA Committee on State Taxation at its annual question and answer session. These documents are classified as revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on their specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.