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C corporation – Apportionment

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Message Board C corporation – Apportionment

This topic contains 2 replies, has 2 voices, and was last updated by Rita Meyeres 2 weeks, 1 day ago.

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  • #178900
    Rita Meyeres
    Participant

    C corporation owns a 25% interest in a California based LLC. LLC has foreign source income and California source income. Is the C corporation eligible under Revenue and Taxation Code section 25110 to make a water’s-edge election to report only California source income on it’s California return? The foreign source income is subject to foreign income tax withholding. Historically, LLC CA K-1 included all sales from all sources. Is the LLC required to include foreign sales on California K-1 issued to C corporation member?

  • #179111
    Sandy Weiner
    Participant

    Water’s edge election only allows certain foreign taxpayers to be excluded from a combined report, it doesn’t allow taxpayers to simply exclude foreign income. See the FTB’s Water’s Edge booklet for details: https://www.ftb.ca.gov/forms/2018/18-100w-booklet.html

    Yes, the foreign sales are included in the California K-1.

  • #179221
    Rita Meyeres
    Participant

    Ms. Weiner,
    Thank you for the reference and response. Can you further address the following:
    Can a Limited Liability Company formed and domiciled in California be considered a unitary business and thereby apportion income to its member, a California C corporation on the basis of a single sales apportionment factor and exclude foreign source income?