Kansas Governor Sam Brownback signed legislation on March 22nd making sweeping changes to Kansas tax law, which will change how tax planning attorneys manage their clients.
The new law requires a taxpayer’s basis in their partnership interest or S-corporation stock will be equal to the basis on January 1, 2013, and then reduced by distributions made after that date … but not increased by the individual business’ income. By doing so, without increasing basis to reflect income, Kansas business owners will receive distributions that exceed their basis, making those distributions taxable income. This will require additional planning and structuring, and possibly require “timed distributions” to avoid excessive taxation.
To safeguard themselves, Kansas tax partnerships and S-corporations should keep separate accounting for State and Federal taxes. For more information on efficient tax planning, please contact us today.