Preparing Kentucky S Corporation returns when the state and federal groups are different

Show expandable text

New (tax) year, new help!

Fixed Assets and UltraTax CS 2023 help is now on Help and Support. We're still moving articles, but you can find most content for the 2023 tax year there. Continue using the Help & How-To Center for tax years 2022 and older.

Use this procedure to ensure the correct preparation of Kentucky S Corporation consolidated income tax returns if the members of the Kentucky group are not the same as those included in the federal consolidated group.

  1. Add Kentucky to the parent client and the applicable subsidiary clients. Complete all data entry for these member clients. Each member's state return should be complete and correct before proceeding to the next step.

    Note: Apportionment data entry must be completed for each member client, even if the client is 100 percent in-state. Apportionment data entry is accessed through View > Apportionment.

  2. Create a new eliminations client for Kentucky purposes and add Kentucky to the client. Complete this client before proceeding to the next step. If an eliminations client was part of the federal S Corporation consolidated group, a new state eliminations client is needed because the eliminations client used in the federal consolidated group may include eliminations involving members that are not to be included in the Kentucky S Corporation consolidated group.

    Note: Including an eliminations client as part of an S Corporation consolidated group is optional.

  3. Clone the existing federal S Corporation consolidated client. Open the federal consolidated client, choose File > Save As, enter a new client ID for the client, and click the Save button. This new client has the same EIN and name as the federal consolidated client, but is used for Kentucky purposes only. UltraTax CS generates the consolidated Form 720S, Kentucky S Corporation Income Tax and LLET Return.
  4. Select the appropriate members to be included in the Kentucky S Corporation consolidated group. Choose File > Client Properties and click the Advanced Properties button. In the Group tab, remove or add subsidiary clients as necessary. If applicable, remove the current eliminations client that was used by the federal client and then add the eliminations client created in step 2. Click OK to close the Advanced Properties dialog. Click OK again to close the New Client or Client Properties dialog.
  5. Add Kentucky to the new S Corporation consolidated client.

    Note: When adding Kentucky to an S Corporation consolidated federal client, the state automatically defaults to being a consolidated S return.

    If the state is added as an S Corporation to a federal consolidated group, the consolidated functionality does not take place. The amounts from each member are not consolidated.

  6. Review all Kentucky consolidated client input screens and complete any necessary remaining data entry. For each category not marked in the File > Client Properties > Advanced Properties > Options dialog, enter the necessary data in the applicable input screens.

    Note: If a category is not marked, enter the data on the applicable input screens in the S Corporation consolidated client. For a list of categories and related input screens, see Categories and related Kentucky input screens.

    Any changes made to the File > Client Properties > Advanced Properties > Options dialog affect both the federal and state return.

  7. To change amounts entered in the Kentucky parent, eliminations, or subsidiary clients, go back to the original source of data entry. For instance, if you made a mistake when you entered the apportionment of the first subsidiary, close the consolidated client and reopen the first subsidiary. Choose View > Apportionment for that client and correct the data. Close the subsidiary client and reopen the consolidated client. The correct amount is now a part of the consolidated group return.
  8. Print and review the Kentucky S Corporation consolidated tax return.

Example of when a Kentucky group is different from a federal consolidated group.

Was this article helpful?

Thank you for the feedback!