W. Va. Code R. § 110-21-17a

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-21-17a - Resident Shareholders Of S Corporations

17a.1. Resident Shareholder Defined. - For purposes of Article 21, Chapter 11 of the Code of West Virginia, 1931, as amended, a resident shareholder is, for any taxable year, an individual, trust or estate which is domiciled in the State of West Virginia, and which qualifies as a resident individual under W. Va. Code '11-21-7 and who is also a shareholder in a small business corporation for which a valid election under Section 1362 of the Internal Revenue Code is in effect for such year.

17a.2. S Corporation Shareholder's Modifications. - in determining West Virginia adjusted gross income and West Virginia taxable income of a resident S corporation shareholder any modification described in W. Va. Code '11-21-12(b), (c) or (d), which relates to an item of income, gain, loss or deduction shall be made in accordance with the S corporation shareholder's pro rata share, for federal income tax purposes, of the items to which the modifications relate. Where a shareholder's pro rata share of any such item is not required to be taken into account separately for federal income tax purposes, the shareholder's pro rata share of such item shall be the pro rata share that such shareholder showed on his or her federal tax return for the tax year in question for S corporation taxable income or loss generally.

17a.2.1. Example. - Wilson is a shareholder in an S corporation, owning sixty percent (60%) of the outstanding shares. In 1989, the S corporation received one thousand dollars ($1,000) interest income on United States obligations and five hundred dollars ($500) interest income on West Virginia bonds. These items are subject to modification. The amount of Wilson's modification is computed by allowing him sixty percent (60%) of the fifteen hundred dollars ($1,500) of the interest income. Each shareholder is entitled to his or her allocable share of modification based upon their ownership percentage.

17a.3. Character Of Items. - Each item of S corporation income, gain, loss or deduction has the same character for an S corporation shareholder on his or her West Virginia Personal Income Tax Return as that item did on such shareholder's federal income tax return for any given taxable year. Where an item is not characterized for federal income tax purposes, it shall have the same character for the S corporation shareholder as if realized by such shareholder directly from the source from which realized by the S corporation, or as if it was incurred by the shareholder in the same manner as incurred by the S corporation.

W. Va. Code R. § 110-21-17a