17 NCAC 06B .3513. NONRESIDENT PARTNERS

(a)  Although a partnership may treat guaranteed payments to a partner for services or for use of capital as if they were paid to a person who is not a partner, such treatment is only for purposes of determining its gross income and deductible business expenses.  For other tax purposes, such guaranteed payments are treated as a partner's distributive share of ordinary income.

(b)  Deductions from federal taxable income do not include a partner's salary, interest on a partner's capital account, partner relocation and mortgage interest differential payments, or payments to a retired partner regardless of whether they were determined without regard to current profits.  These types of payments are treated as part of the partnership income.

(c)  A nonresident individual partner is not required to file a North Carolina individual income tax return when the only income from North Carolina sources is the nonresident's share of income from a partnership doing business in North Carolina and the manager of the partnership has reported the income of the nonresident partners and paid the tax due.  A nonresident partner may file an individual income tax return and claim credit for the tax paid by the manager of the partnership if the payment is properly identified on the individual income tax return.

(d)  A partnership's business activities are not segregated if it does not employ a method of accounting that clearly reflects the income or loss of its separate activities.  A partnership must allocate to North Carolina the income derived from its business activities in North Carolina that are segregated from its other business activities.  Income derived from a partnership's business activities outside of North Carolina that are segregated from its other business activities are not includable in determining the tax due for nonresident partners.  This allocation of income does not affect the reporting of partnership income by the resident partner because he is taxed on his share of the net income of the partnership whether or not any portion of it is attributable to another state or country.

 

History Note:        Authority G.S. 105‑134.5(d); 105‑154; 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1994; June 1, 1993; February 3, 1992; October 1, 1991.