PA-20S/PA-65 Schedule RK-1 — Resident Schedule of Shareholder/Partner/Beneficiary Pass Through Income

IMPORTANT: FILL IN FORM MUST BE DOWNLOADED ONTO YOUR COMPUTER PRIOR TO COMPLETING
PA SCHEDULE RK-1
Resident Schedule of Shareholder/
Partner/Beneficiary Pass Through
Income, Loss and Credits
PA-20S/PA-65 RK-1 (DR) MOD 04-25 (FI)
PA Department of Revenue
Last Name

# START SSN

§
Spouse's SSN
If jointly held
First Name
Suffix M I
Name of Owner Receiving RK-1 (if other than an individual) 9 DIGIT - NO DASH
FEIN
Do not exceed six decimal places
Street Address - If Address has Apartment Number, Suite, RR No.
First Line of Address Place on this Line.
Second Line of Address

# SECTION

I ZIP Code
City or Post Office State
Name of Entity Issuing RK-1
City or Post Office ZIP Code
State
9 DIGIT - NO DASH
FEIN
Fiscal Year
Final
Amended Schedule Owner Type:
Shareholder's stock ownership: __%
If Owner is D Fill in:
Partner's percentage of:
FEIN
Profit sharing: __%
Use ALL CAPITAL LETTERS
Loss sharing: __% for address information.
Ownership of capital: __%
Partner Type:
General Partner
Entity Type: or LLC Member

• Manager

Limited Partner or Other LLC
Short Year
52/53 Week
Member
Begin End
MM/DD/YY Enter whole dollars only
NOTE: Amounts from this schedule must be reported on the appropriate PA Tax Return. l00 If a loss, fill in the oval.
1 PA-Taxable Business Income (Loss) from Operations … l00
If a loss, enter "0"
2 Interest Income … l00
If a loss, enter "0"
3 Dividend Income …

# SECTION

II l00
4 Net Gain (Loss) from the Sale, Exchange or Disposition of Property … If a loss, fill in the oval. l00 If a loss, fill in the oval.
5 Net Income (Loss) from Rents, Royalties, Patents and Copyrights … l00
If a loss, enter "0"
6 Income of/from Estates or Trusts …
7 Gambling and Lottery Winnings (Loss) l00
If a loss, fill in the oval. l00
8 Resident Credit. Submit statement …

# SECTION

III l00
9 Total Other Credits. Submit statement … 9 l00 10 Distributions of Cash, Marketable Securities and Property - not including guaranteed payments … 10 l00 11 Guaranteed Payments for Capital or Other Services …

# SECTION

IV l00
12 All Other Guaranteed Payments for Services Rendered … l00 13 Guaranteed Payments to the Retired Partner … l00 If liquidating, fill in the oval.
14 Distributions from PA Accumulated Adjustments Account …

# SECTION

V l00
15 Distributions of Cash, Marketable Securities and Property … 15 l00 If a loss, fill in the oval.
16 Nontaxable income (loss) or nondeductible expenses required to …

# SECTION

VI calculate owner's basis. Submit statement. l00 17 Owner's Share of IRC Section 179 (SUPPLEMENTAL INFORMATION ONLY) … 17 l00 18 Owner's Share of Straight-Line Depreciation …

# SECTION VII

19 Partner's Share of Nonrecourse Liabilities at year-end … l00 20 Partner's Share of Recourse Liabilities at year-end …

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Instructions for PA-20S/PA-65 Schedule RK-1
Resident Schedule of Shareholder/Partner/Beneficiary PA-20S/PA-65 RK-1 IN (DR) MOD 04-25

# GENERAL INFORMATION PURPOSE OF SCHEDULE

Partnerships and S corporations use the PA Schedule RK-1 to report income and losses by class of income to each of its resident owners. A PA Schedule RK-1 is prepared for each individual partner, member or shareholder showing the share of income (losses) by class and other items required to be reported.
Pennsylvania partners, members or shareholders (owners) who are individuals are subject to Pennsylvania personal income tax on their share of the entity's income, whether or not the income is actually distributed.
Owners who are individuals who reside in Pennsylvania are taxed on their share of the entity's income, regardless of the income source.
The PA-20S/PA-65 Schedule RK-1 provides each partner, member or shareholder (owner) and entity owner their share of income, losses and credits from the partnership, PA S corporation, and/or entity formed as a limited liability company classified as a partnership or S corporation for federal income tax purposes.

# WHO SHOULD RECEIVE

PA SCHEDULE RK-1
A PA-20S/PA-65 Schedule RK-1 must be completed for every Pennsylvania resident owner that has an ownership interest in a partnership, S corporation, and/or entity formed as a limited liability company classified as a partnership or S corporation for federal income tax purposes.
A copy of the PA-20S/PA-65 Schedules RK-1 for each partner, member or shareholder (owner) must accompany the entity's PA-20S/PA-65 Information Return. Owners must receive a copy or copies to prepare Pennsylvania tax or information returns. The PA S corporation or partnership must also retain a copy of all PA-20S/PA-65 Schedules RK-1 as part of the entity's records.
In addition, a PA-20S/PA-65 Schedule RK-1 must be completed for all resident owners that are estates, trusts, other PA S corporations, other partnerships, and other pass through entities. The Pennsylvania taxable income passes through to the final taxpayer. Therefore, the immediate partners, members and shareholders must know the total Pennsylvania taxable income in the event the final owner is a Pennsylvania resident. In the event that the final owner is a nonresident of Pennsylvania, the owner must know Pennsylvania source taxable income.
Pass Through Income, Loss and Credits
A partnership, S corporation or limited liability company classified as a partnership or S corporation for federal tax purposes (entity) that fails to file a PA-20S/PA-65, S Corporation/Partnership Information Return may be subject to a $250 non-filer penalty. The $250 penalty also applies to each missing PA Schedule RK-1 or NRK-1.
NOTE: An entity that is the owner of another entity receives both the PA-20S/PA-65 Schedules RK-1 and NRK-1.
PA SCHEDULE RK-1 FOR
C CORPORATION PARTNERS

# PAPER RETURNS AND ELECTRONIC FILED RETURNS

The PA-20S/PA-65 Schedule RK-1 submitted with the PA-20S/PA-65 Information Return does not need to be issued to C corporation taxpayers unless a credit from the PA-20S/PA-65 Schedule OC has been allocated.
Partnerships, PA S corporations, estates, trusts and/or limited liability companies must submit PA-20S/PA-65 Schedule RK-1 with the applicable Pennsylvania tax returns.
If a C corporation taxpayer receives a PA-20S/PA-65 Schedule RK-1, the amount from Line 9, Total Other Credits, must be reported on the appropriate Pennsylvania tax return.

# PART-YEAR RESIDENT OWNERS

The requirements are different for PA S corporations and partnerships to issue PA Schedules RK-1 and/or NRK-1 to its owners as described below.

# PA S CORPORATIONS ONLY SHAREHOLDER RESIDENCY PERIOD

A PA S corporation must submit a separate PA-20S/PA-65

Schedule RK-1 for that portion of the tax year during which a part-year resident shareholder was a resident of Pennsylvania. Part-year shareholders have business income and losses prorated based upon the number of days in the tax year these individuals are located within and outside the state. Each shareholder's pro rata distributive share of total income, losses and credits reported on the PA-20S/PA-65 Information Return determines the income amounts for the lines that are included on the PA Schedule RK-1. Income is allocated based on days residing or not residing in Pennsylvania. Pennsylvania considers any day or partial day an owner has a residence or domicile within the commonwealth to be a Pennsylvania residency day. The owner will receive a PA-20S/PA-65 Schedule RK-1 and

NRK-1 reflecting the proportionate share of income earned while a resident and a nonresident.
In order to calculate the PA Schedule RK-1 income and losses by class for the residency period, first determine the proportional number of days a shareholder resided in the state. Using the number of days a shareholder was located in the state as the numerator, divide this figure by the total number of days in the tax year representing the denominator. The resulting ratio should be multiplied by the PA and non-PA income and losses by class shown on page one of the PA-20S/PA-65 Information Return. This figure is then multiplied by the shareholder's stock ownership percentage to determine the PA Schedule RK-1 income and losses by class.

# PARTNERSHIPS ONLY RESIDENCY PERIOD

A resident partner reports income based upon residency status at year-end and does not prorate the income. The partnership must submit a separate PA-20S/PA-65 Schedule RK-1 for each individual partner if during the partnership's taxable year the partner was:
● A Pennsylvania resident at the close of the taxable year;
● Deceased and a Pennsylvania resident at the time of death during the taxable year; and/or ● A Pennsylvania resident at the close of business on the day during the taxable year that the partner sold, exchanged, disposed of, liquidated, or redeemed their entire interest in the partnership.
NOTE: Income is considered earned on the final day of the tax year. If the partner is a resident on the last day of the year, they will receive a PA-20S/PA-65 Schedule RK-1. The Partner can claim out-of-state credit on income taxed elsewhere.

ENTITIES WITH A SIGNIFICANT

NUMBER OF OWNERS
The department will not accept any PA Schedules RK-1 and NRK-1 in CD rom format. Please reference Informational Notice PIT 2013-02. Schedules RK-1 and NRK-1 submitted in this format will not be processed and the entity may be subject to the $250 non-filer penalty that applies for each missing PA Schedule RK-1 and NRK-1.

# HOW TO AMEND PA SCHEDULE RK-1

An amended PA-20S/PA-65 Information Return and an amended PA-20S/PA-65 Schedule RK-1 for each owner must be filed to correct any error on or reflect any change to the original PA-20S/PA-65 Information Return, whether or not an amended federal Form 1120S or federal Form 1065 was filed for that year.
To amend an original PA-20S/PA-65 Schedule RK-1, use a blank schedule for the tax year to be amended and fill in the "Amended Schedule" oval at the top of the schedule. Do not send a copy of the original schedule. Complete the schedule by entering the corrected information and submit it with the amended PA-20S/PA-65 Information Return. See WHERE TO FILE in the PA-20S/PA-65 Information Return instructions.
IMPORTANT: When submitting an amended RK-1, the amended PA-20S/PA-65 Information Return must accompany it, or it will not be accepted by the department.

COMPLETING PA SCHEDULE RK-1

FOREIGN ADDRESS STANDARDS
If the PA S corporation, partnership or entity formed as a limited liability company classified as a partnership or PA S corporation for federal income tax purposes is located outside the U.S., it is important to write the foreign address on the PA-20S/PA-65 Schedule RK-1 according to U.S.
Postal Service standards.
Failure to use these standards may delay processing or correspondence necessary to complete the processing of the return.
To comply with foreign address standards, use the following rules when completing the address portion of the PA-20S/ PA-65 Schedule RK-1.
● Eliminate apostrophes, commas, periods and hyphens.
Write the address in all uppercase letters. Addresses should have no more than four lines and must be written in black ink or typewritten. Pencil is unacceptable.
● Write the name of the entity in the space provided. Mail may not be addressed to a person in one country "in care of" a person in another country. The address of items sent to general delivery must indicate the addressee's full legal name.
● Write the address in the space provided, including street and building name and number, apartment or suite numbers, city name and city or provincial codes. All lines of the delivery address should appear in all capital letters. The house number and street address or box number must appear when mail is addressed to towns or cities.
● Write only the name of the country in the space provided for the city or post office.
● Do not include any entries in the state field other than "OC" for Out-of-Country. The ZIP Code spaces should remain blank on the PA-20S/PA-65 Schedule RK-1.
Providing the address in this format will better ensure that the department is able to contact the entity if additional information is required.
Below are examples of properly completed foreign addresses.

FOREIGN ADDRESS EXAMPLES

Name: DIETRICH ENTERPRISES
Address 1: HARTMANNSTRASSE 7
Address 2: 5300 BONN 1

City: GERMANY

State: OC

ZIP Code: Leave Blank
OR

Name: DIETRICH ENTERPRISES

Address 1: 117 RUSSELL DR

Address 2: LONDON W1PGHQ

City: ENGLAND

State: OC

ZIP Code: Leave Blank

CANADA (ONLY) ADDRESS EXAMPLE
The following address format may be used when the postal address delivery zone number is included in the address:

Name: NORTH BY NORTHWEST CO

Address 1: 1010 CLEAR ST

Address 2: OTTAWA ONT K1A 0B1

City: CANADA

State: OC

# ZIP Code: Leave Blank

If the entity's address does not fit in the available spaces on the PA-20S/PA-65 Schedule RK-1 using this format, please submit a separate statement that includes the entity's name, entity's federal employer identification number, tax year and complete address.
NOTE: For a Canadian address, two spaces must exist between the province abbreviation and the postal code.
Please review previous example where "ONT" (province abbreviation) and "K1A 0B1" (postal code) are shown with the proper address format, separated by two spaces.

# SECTION I GENERAL INFORMATION

IMPORTANT: All required information must be included for both the RECEIVER and ISSUER of the RK-1. Failure to provide a complete SSN/FEIN for both parties, along with their full name and address, will result in an incomplete RK-1 and may lead to processing issues with the department.
SSN
Enter the nine-digit Social Security number (SSN) of the individual receiving the PA-20S/PA-65 Schedule RK-1. If the owner is a disregarded entity, use the SSN of the beneficial owner. Do not use the TIN of a disregarded entity.

LAST NAME, SUFFIX, FIRST NAME, MIDDLE INITIAL
Enter the last name; suffix such as Jr., Sr., etc.; first name and middle initial of the individual receiving the PA-20S/PA-65 Schedule RK-1.
SPOUSE'S SSN
Enter the nine-digit SSN of the spouse (if jointly held) receiving the PA-20S/PA-65 Schedule RK-1.
FEIN
Enter the nine-digit federal employer identification number
(FEIN) of the owner (if other than an individual) receiving the PA-20S/PA-65 Schedule RK-1.
NOTE: Do not use the TIN of a disregarded entity as the owner receiving RK-1. List the TIN of the beneficial owner in the appropriate section for SSN or FEIN. Provide the FEIN of the disregarded entity within in the OWNER portion of Section I.
NAME OF OWNER RECEIVING RK-1 (IF OTHER THAN
AN INDIVIDUAL)
If the owner of the entity is a partnership, PA S corporation, estate, trust or entity formed as a limited liability company classified as a partnership or PA S corporation for federal income tax purposes, enter the name of the entity owner receiving the PA-20S/PA-65 Schedule RK-1. Eliminate all punctuation such as apostrophes, commas, periods and hyphens.
If the PA Schedule RK-1 is being issued to an individual or disregarded entity whose beneficial owner is an individual (See, NOTE under FEIN above), fill this area in with the individual owner information. Fill the Owner Type as "D" and fill in the box below Owner Type with the FEIN of the Disregarded Entity.

# FIRST LINE OF ADDRESS

Enter the street address of the owner receiving the PA-20S/ PA-65 Schedule RK-1. If the address has an apartment number, suite or RR number, enter it after the street address.
Eliminate all punctuation such as apostrophes, commas, periods and hyphens.
NOTE: If the street address along with the apartment number, suite or RR number does not fit on the first line of address, then enter the street address on the second line of address and the apartment number, suite or RR number on the first line of address.

# SECOND LINE OF ADDRESS

Enter the post office box, if appropriate, of the owner receiving the PA-20S/PA-65 Schedule RK-1. If there is no post office box, leave the second line of the address blank.
Eliminate all punctuation such as apostrophes, commas, periods and hyphens.
For a foreign address enter the city or municipal designation.
See FOREIGN ADDRESS EXAMPLES.
For a Canadian address, enter the city and postal delivery zone number. See CANADA ADDRESS EXAMPLE.
IMPORTANT: If the address has only a post office box, enter on the first line of address.

CITY, STATE AND ZIP CODE
Enter the appropriate information in each box. Eliminate all punctuation such as apostrophes, commas, periods and hyphens.
NAME OF ENTITY ISSUING RK-1
Enter the name of the entity issuing the PA-20S/PA-65 Schedule RK-1. Eliminate all punctuation such as apostrophes, commas, periods and hyphens.

CITY, STATE AND ZIP CODE
Enter the appropriate information of the entity issuing the PA-20S/PA-65 Schedule RK-1 in each box. Eliminate all punctuation such as apostrophes, commas, periods and hyphens.

FEIN
Enter the nine-digit FEIN of the entity issuing the PA-20S/ PA-65 Schedule RK-1.

# AMENDED SCHEDULE

Fill in the oval if the PA-20S/PA-65 Schedule RK-1 is an amended schedule.
FINAL
Fill in the oval if the PA-20S/PA-65 Schedule RK-1 is a final schedule.
SHAREHOLDER'S STOCK OWNERSHIP
Enter the shareholder's percentage of stock ownership in the PA S corporation.
Valid values are: "00000" to "10000", where 10000 = 100% Decimal point is implied after 3rd character from the left e.g. to indicate 33.33%, the value should be "03333" e.g. to indicate 25%, the values should be "02500"

# PARTNERSHIP PERCENTAGE

Enter the partner's percentage of each of the following at the close of the taxable year:
● Profit sharing
● Loss sharing
● Ownership of capital
Valid values are: "00000" to "10000", where 10000 = 100% Decimal point is implied after 3rd character from the left e.g. to indicate 33.33%, the value should be "03333" e.g. to indicate 25%, the values should be "02500"
OWNER
From the list below, enter the code that corresponds with the type of owner is receiving the PA-20S/PA-65 Schedule RK-1:
● I = Individual
● S = S Corporation
● C = C Corporation
● E = Estate
● T = Trust
● P = Partnership
● L = LLC
● X = Exempt
● D = Disregard Entity
If owner is a disregarded entity, the FEIN field below must be filled out.

# PARTNER

Fill in the oval that designates what type of partner received the PA-20S/PA-65 Schedule RK-1. Fill in one oval only.

# ENTITY

From the list below, enter the code that corresponds with the type of owner issuing the PA-20S/PA-65 Schedule RK-1. If issuer is a disregarded entity, the FEIN field below the Entity field must be filled out.
● S = S Corporation
● P = Partnership
● E = Estate
● T = Trust
● L = LLC

# FISCAL YEAR

If the PA S corporation, partnership or limited liability company filing as a partnership or PA S corporation for federal income tax purposes does not file on a calendar-year basis, fill in fiscal-year oval. Enter the month, day and year (MMDDYY) when the fiscal year begins and ends.
52/53 WEEK
If the PA S Corporation, partnership or limited liability company filing as a partnership or PA S corporation for federal income tax purposes files on a basis of 52/53 week, fill in the oval. Enter the month day and year (MMDDYY) when the 52/53 week year begins and ends.
NOTE: Do not fill in the fiscal filer oval.

# SHORT YEAR

A short year is an accounting period shorter than one year and not a 52/53 week taxable year.
A short-year return is required for the following reasons:
● Changes in the annual accounting period. For example, the entity changes from a fiscal-year filer to a calendar-year filer; or ● An entity is in existence during only part of the tax year.
For example, if the year is the initial year or final year for all entities.
See the PA-20S/PA-65 Information Return instructions on how to file a short-year return.

# LINE INSTRUCTIONS SECTION II

OWNER'S DISTRIBUTIVE SHARE OF PENNSYLVANIA
SOURCE INCOME (LOSS)
LINE 1
PENNSYLVANIA TAXABLE BUSINESS INCOME (LOSS)

# FROM OPERATIONS

Enter the owner's pro rata distributive share from the PA-20S/PA-65 Information Return, Line 1e. The entity must report the owner's share of income (loss) whether distributed or not. If reporting a loss, fill in the oval.
Guaranteed payments should not be included on Line 1 of the PA-20S/PA-65 Schedule RK-1.
LINES 2 THROUGH 7
Enter the owner's pro rata distributive share of the separately stated items of other Pennsylvania taxable income (loss) from the PA-20S/PA-65 Information Return.
Pennsylvania taxable income includes total of Pennsylvania source and outside Pennsylvania income (loss). If reporting a loss on Lines 4, 5 and/or 7, fill in the oval.

# SECTION III

OWNER'S SHARE OF PENNSYLVANIA CREDITS
Enter the owner's pro rata distributive share of the separately stated credits that the PA S corporation or partnership passes through to the owners from the PA-20S/PA-65 Information Return.
LINE 8

# RESIDENT CREDIT - SUBMIT STATEMENT

Do not use Line 8 to report a resident credit for an Entity Level Tax. Certain states have imposed an entity level tax
(ELT) on pass-through entities resulting from the Federal Tax Cut and Jobs Act (P.L. No: 115-97). Please see Answer ID 3618 (on the Department of Revenue homepage, select the Frequently Asked Questions link and enter 3618 in the search box) for additional information and clarification.
Enter the Pennsylvania resident owner's pro rata distributive share of credit calculated from composite returns filed by the PA S corporation or partnership on behalf of resident owners. Submit a statement with the PA-20S/PA-65 Schedule RK-1 to notify the owner of the breakdown of states, breakdown by Pennsylvania income class, taxes paid to those states and the resident credit claimed, which is the lessor of the actual tax paid or 3.07 percent of the total income taxed in the other state.
The statement must include the entity's name, entity's federal employer identification number, tax year, owner name(s), and owner tax identification number(s).
NOTE: If a composite return is filed in other states, the entity must submit a copy of the out-of-state returns for all resident credits claimed.
LINE 9

# TOTAL OTHER CREDITS - SUBMIT STATEMENT

Enter the owner's pro rata share from the PA-20S/PA-65 Information Return, Section V, Line 13a. The entity must provide the owner with a statement listing which credit(s) have been passed through to them. When applicable, Line 9 includes credits for PA S corporations treated as C corporations in other states.
The statement must include the entity's name, entity's federal employer identification number, tax year, owner name(s), and owner tax identification number(s).
IMPORTANT: See PA-20S/PA-65 Schedule OC instructions for which credits must be applied to corporate tax liability prior to being passed through to the entity's owners. C corporation owners cannot claim credit for taxes paid to other states.

# SECTION IV DISTRIBUTIONS FROM PARTNERSHIPS

Noncorporate shareholders and partners should use amounts from PA-20S/PA-65 Schedule RK-1, Section IV through Section VII to determine or calculate owner's basis.
Partners include Line 12 in net classified income on their Pennsylvania tax returns.
LINE 10

DISTRIBUTION OF CASH, MARKETABLE SECURITIES
AND PROPERTY NOT INCLUDING GUARANTEED

# PAYMENTS

Enter the partner's share of distribution of cash, marketable securities and property, other than guaranteed payments.
With respect to liquidating property distributions, this line will include the total of cash and the fair market value of marketable securities and property distributed to the Pennsylvania resident partner.
The partner reduces his basis in the partnership by amount of distributions. If the distribution amount is in excess of basis, it must be reported on the resident partner's return as taxable gain on Schedule D.
LINE 11

# GUARANTEED PAYMENTS FOR CAPITAL OR OTHER SERVICES

Enter the partner's share of guaranteed payments for capital or other services.
Pennsylvania does not follow federal treatment for guaranteed payments for services. Under Pennsylvania tax law, to the extent paid for other services or for the use of capital, a guaranteed payment is:
● A withdrawal proportionately from the capital of all partners;
● A gain from the disposition of the recipient's partnership interest and a loss from the disposition of the other partners' partnership interests, to the extent derived from the capital of the other partners; and ● A return of capital by the recipients to the extent derived from their own capital.
Pennsylvania allows the deduction.
LINE 12

# ALL OTHER GUARANTEED PAYMENTS FOR SERVICES RENDERED

Enter the partner's share of such payments. Typically, guaranteed payments to partners are paid to the extent the services are rendered directly in the production of income from a business, profession or farm, and/or from rental or royalty income.
NOTE: The partner must know the class of income from which the partnership made the guaranteed payments. The partner must then properly classify the payments on their PA-40 Individual Income Tax Return.
IMPORTANT: If the total guaranteed payment includes more than one of the income classes described below, the partnership must provide a statement to the partners showing the amounts for each line.
For Pennsylvania personal income tax purposes, guaranteed payments are classified as follows:
● If services are rendered directly in the production of income from a business, profession, or farm, the guaranteed payments are gross income from that income class.
● If services are rendered directly in the production of rental or royalty income, the guaranteed payments are gross income from that income class.
HEALTH SAVINGS ACCOUNTS (HSA)
Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. The contributions are treated as a distribution of money and are not included in the partner's income.
Contributions by a partnership to a partner's HSA for services rendered, however, are treated as guaranteed payments that are deducted by the partnership and included in the partner's income. In both situations, the partnership can deduct the contribution made to the partner's HSA.
Contributions to a nonresident partner's HSA for services must be apportioned.
Contributions by an S corporation to a 2 percent shareholder/employee's HSA for services rendered are deducted by the S corporation as wage or salary expense and included in the shareholder/employee's gross compensation. The shareholder-employee can deduct the contribution made to the shareholder/employee's HSA.
LINE 13

# GUARANTEED PAYMENTS TO RETIRED PARTNER

Guaranteed payments to a retired partner must meet the exception described in IRC §1402(a)(10).
Generally, retirement payments received by a retired partner from a partnership (of which he or she is a member or former member) are counted as net earnings from self-employment.
Certain periodic payments by a partnership to a retired partner made on account of retirement under a written plan of partnership are excluded from the tax. To be effective, the plan must meet such requirements as are prescribed by Reg §1.1402(a)-17. It must apply to partners generally or to a class or classes of partners, and provide such payments at least until the retired partner's death.
The exclusion applies to retirement payments received by a retired partner only if he or she renders no services in any business conducted by the partnership during the taxable year of such partnership, ending within or with his or her taxable year in which amounts were received. At the end of such partnership's taxable year: (1) there must be no obligation from other partners to the retired partner, other than to make retirement payments under the plan; and (2) the retired partner's share in the capital of the partnership had been paid to him or her in full. Code Sec. 1402(a)(10) Reg §1.1402(a)-17.

# SECTION V DISTRIBUTIONS FROM PA S CORPORATIONS

LINE 14

DISTRIBUTIONS FROM PA ACCUMULATED
ADJUSTMENTS ACCOUNT
Enter the shareholder's share of such distributions. If a liquidating distribution, fill in the oval. If the amount is in excess of basis, it must be reported on the shareholder's return as taxable gain on Schedule D.
LINE 15

DISTRIBUTIONS OF CASH, MARKETABLE
SECURITIES AND PROPERTY
Enter the shareholder's share of such distributions. This line will include the total of cash and the fair market value of all marketable securities and property distributed to the shareholder.

# SECTION VI

NONTAXABLE INCOME (LOSS) IN OWNER'S BASIS
LINE 16
NONTAXABLE INCOME (LOSS) OR

NONDEDUCTIBLE EXPENSES REQUIRED
TO CALCULATE OWNER'S BASIS
The difference between federal and Pennsylvania depreciation should not be included on this line. Line 16 is based on permanent nontaxable income or nondeductible expenses in calculating Pennsylvania taxable income. This amount is generally not the same amount reported on the PA-20S/PA-65 Information Return, Section IV, Line 12 because Line 12 should include non-permanent items.
Submit a statement that includes the entity's name, entity's federal employer identification number and tax year. Provide a breakdown of all nontaxable income earned and all nondeductible expenses not taken. This amount should only include permanent differences needed to calculate the owner's basis in the entity. If reporting a loss, fill in the oval.
The entity provides the owners with this information so the owners can calculate their basis. Examples of nontaxable income are tax-exempt interest, gifts, inheritance, loan proceeds, insurance proceeds and federal tax refunds.
Examples of non-deductible expenses are partner's retirement contributions, partner's life and health insurance premiums.
These items may be listed on federal Form 1120S Schedule K as "Items Affecting Shareholder Basis" and on federal Form 1065 Schedule K as "Other Information."

# SECTION VII SUPPLEMENTAL INFORMATION

The owners will need certain information to determine their outside Pennsylvania basis in the entity, taking into consideration distributions that may exceed their ownership interests.
LINE 17
OWNER'S SHARE OF IRC §179 ALLOWED
Enter the owner's share of IRC §179 depreciation expense.
Each entity and individual taxpayer is limited to the IRC §179 federal depreciation expense for years beginning on or after January 1, 2023. Do not deduct this amount from any income class. This is for information only and is used to verify the owner has not exceeded the IRC §179 depreciation expense on an individual entity or aggregate basis. This amount has already been deducted from the applicable income class. Do NOT deduct again.
LINE 18
OWNER'S SHARE OF STRAIGHT-LINE DEPRECIATION
Enter the owner's share of the entity's total expense.
Assets for which accelerated depreciation has been calculated must be recalculated using straight-line depreciation in order to calculate outside Pennsylvania basis in the entity. The life of the asset must be the same life that was used to calculate depreciation expense deducted in determining Business Income (Loss) from Operations and/or Rental Income (Loss).
LINE 19
PARTNER'S SHARE OF NONRECOURSE LIABILITIES

# AT YEAR-END

Enter the partner's share of nonrecourse liabilities at year-end.
A nonrecourse liability is a secured liability, identified by the partnership, for which the partners are not personally liable.
Nonrecourse liabilities apportion such debts to each partner's outside basis and validate deductions based on such liabilities.
LINE 20
PARTNER'S SHARE OF RECOURSE LIABILITIES AT

# YEAR-END

Enter the partner's share of recourse liabilities at year-end. A recourse liability is one for which a partner is personally liable.
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