I wanted to know whether my K-1 losses sustained from my New Jersey 'S' corporation are deductible on my New Jersey Gross Income Tax return, ie my NJ 1040 tax return?

Thanks..

The New Jersey Tax law appears to treat 'S' Corporation and Partnership losses losses flowing to the individual partners/shareholders via the NJ K-1 differently than the IRS.

According to the Federal Tax law, all the partner's/shareholder's may be able to deduct the 'S' Corporation or Partnership net losses reported on K-1 on their respective Individual Federal Form 1040 tax return, subject to the basis limitations.

However, New Jersey State, specifically does not allow any losses derived from the K-1 of any S Corporations or Partnerships to be deductible on the partner's/shareholders respective Individual's Form NJ 1040 tax return, regardless of the the basis limitations considerations.

New Jersey law states that "If the net amount from all Schedule NJK-1s is zero or less, make no entry on your NJ 1040 return." However, New Jersey law states that "If you are a partner in a partnership only the amount of net income derived from the partnership must be reported on your New Jersey personal income tax return."

It seems that New Jersey only wants to tax your partnership net income but does not wish to provide a deduction for losses from these partnership activities!

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.