Arizona Nonresident Shareholder's Share of Income and Deductions

Nonresident Shareholder's Share of Income and Deductions
Arizona Form 120S Schedule K-1(NR)
Nonresident Shareholder’s Share
of Income and Deductions

Arizona Form

120S Schedule K-1(NR)

2022

For the  calendar year 2022 or  fiscal year beginning M M D D 2 0 2 2 and ending M M D D 2 0 Y Y .
CHECK ONE:

 Original	  Amended

Shareholder’s Tax Identification Number

S Corporation’s Employer Identification Number (EIN)

Shareholder’s Name

S Corporation’s Name

Shareholder’s Address – number and street or rural route

S Corporation’s Address – number and street or rural route

Shareholder’s City, Town or Post Office

S Corporation’s City, Town or Post Office

State ZIP Code

State ZIP Code

%

Shareholder’s percentage of stock ownership for the taxable year: 

Pass-Through Entity Election:
Did the S Corporation make the Pass-Through Entity Election?

Yes No

If the S Corporation made the Pass-Through Election, did this Shareholder consent to that election?

Part 1

Yes No

Share of Income and Deductions
Pro Rata Share Items From
federal Form 1120-S, Schedule K-1

(a)
Distributive
Share Amount

(b)
Arizona
Apportionment Ratio

(c)
Arizona
Source Income

Form 140NR Filers:
Enter the amount in
column (c) on:

1 Ordinary income (loss) from trade or
business activities.....................................................
2 Net income (loss) from rental real estate activities....
3 Net income (loss) from other rental activities............
4 Total: Add lines 1, 2, and 3.......................................

Line 21

5 Interest......................................................................

Line 16

6 Dividends...................................................................

Line 17

7 Royalties....................................................................

Line 21

8 Net short-term capital gain (loss)..............................

Line 20

9 Net long-term capital gain (loss)................................

Line 20

10 Net IRC Section 1231 gain (loss)..............................

Line 20

11 Other income (loss)...................................................

Line 22

12 IRC Section 179 expense..........................................

Line 21

13 Other deductions: Include schedule.........................
Continued on page 2 

ADOR 10338 (22)

Name of S Corporation (as shown on page 1)

Part 2

Employer Identification Number

Net Capital Gain (Loss) From Investment in a Qualified Small Business – Information Schedule

If the shareholder’s federal Schedule K-1 (Form 1120-S) does not include any net capital gain (loss) from investment in a qualified small
business as determined by the Arizona Commerce Authority, the S Corporation is not required to complete Part 2.
(a)
Distributive Share Amount

Pro Rata Share Items
14 Net capital gain (loss) from investment in a
qualified small business...........................................

Part 3

(b)
Arizona Apportionment Ratio

(c)
Arizona Source Income

14

Net Capital Gain (Loss) From the Exchange of Legal Tender – Information Schedule

If the shareholder’s federal Schedule K-1 (Form 1120-S) does not include any net capital gain (loss) from the exchange of legal tender,
the S Corporation is not required to complete Part 3.
(a)
Distributive Share Amount

Pro Rata Share Items
15 Net capital gain (loss) from the exchange of legal
tender.......................................................................

Part 4

(b)
Arizona Apportionment Ratio

(c)
Arizona Source Income

15

Net Long-Term Capital Gain (Loss) Subtraction – Information Schedule

If the shareholder’s federal Schedule K-1 (Form 1120-S) includes capital gain (loss), complete lines 16 through 18. If the shareholder’s
federal Schedule K-1 (Form 1120-S) does not include any capital gain (loss), the S Corporation is not required to complete Part 4.
(a)
Distributive Share
Amount

(b)
(c)
Arizona Source Income Net long-term capital
gain (loss) included
in column (b) from
From page 1, line 9,
From page 1, line 9,
assets acquired before
column (a) and/or line column (c) and/or line January 1, 2012
10, column (a).
10, column (c).

Pro Rata Share Items
From federal Form 1120-S, Schedule K-1

16 Total net long-term capital gain (loss).............

(d)
Net long-term capital
gain (loss) included
in column (b) from
assets acquired after
December 31, 2011

16

ADDITIONAL INFORMATION:
17 Net long-term capital gain (loss) from
investment in a qualified small business
(amount already included in line 16,
column (d))....................................................
18 Net long-term capital gain (loss) from
exchange of legal tender (amount already
included in line 16, column (d)).....................

17

18

Continued on page 3 

ADOR
10338 (22)
	

AZ Form 120S, Schedule K-1(NR) (2022)

Page 2 of 3

Name of S Corporation (as shown on page 1)

Employer Identification Number

Part 5 Marijuana Establishments Only - Information Schedule
Shareholder’s Pro Rata Share of Disallowed Federal Expenses

Shareholder’s Distributive Share

19 Enter the S Corporation’s disallowed federal expenses from line 16 of Schedule DFE.. ...................... 19
20 Multiply the amount on line 19 by the shareholder’s ownership percentage shown on page 1.
Enter the result. This is the shareholder’s portion of the credit. . .......................................................... 20

SHAREHOLDER:
The amount reported on line 20 is your share of the S Corporation’s disallowed federal expenses.
Enter this amount on your Arizona income tax return.
• If you did not make the Small Business Income election and are filing Arizona Form 140NR, enter this amount on page 6, line L.
• If you did not make the Small Business Income election and are filing Arizona Form 140PY, enter this amount on page 6, line V.
• If you made the Small Business Income election and are filing Arizona Form 140NR-SBI, enter this amount on line 44.
• If you made the Small Business Income election and are filing Arizona Form 140PY-SBI, enter this amount on line 44.

Part 6 Shareholder’s Share of the S Corporation’s Pass-Through Entity Tax Credit

If the shareholder consented to the S Corporation’s election to be a Pass-Through Entity (PTE), complete Part 6. Otherwise, leave blank.
Shareholder’s Pro Rata Share of PTE Election

Shareholder’s Distributive
Share

21 Shareholder’s pro-rata share of the PTE Tax Credit.
Individuals, enter this amount on Form 355, Part 1, line 2.
Estates and trusts, see the instructions for Form 141AZ, line 19 to claim this credit....................................

22 Shareholder’s pro-rata share of the Arizona PTE Taxes paid in 2022 for taxable year 2022.
Individuals, add this amount back on Form 140NR, page 5, line K, or Form 140NR-SBI, line 24.
Estates and trusts, add this amount back on Form 141AZ, Schedule B, line B3..........................................

23 Shareholder’s pro-rata share of comparable PTE Taxes from other states paid in 2022 for taxable year 2022.
Individuals, add this amount back on Form 140NR, page 5, line K, or Form 140NR-SBI, line 24.
Estates and trusts, add this amount back on Form 141AZ, Schedule B, line B3..........................................

21

22

23

Print
ADOR
10338 (22)
	

AZ Form 120S, Schedule K-1(NR) (2022)

Page 3 of 3

2022 Nonresident Shareholder’s Share
of Income and Deductions
Instructions for Nonresident
Shareholders
Part 1 - Share of Income and Deductions

Nonresident shareholders, column (c) is your Arizona
source income:
• If you are a nonresident individual, use the line
numbers on Schedule K-1(NR) to report the amounts
shown in column (c) on your Arizona Form 140NR.
• If you are a nonresident trust or estate, add lines 4
through 13 in column (c). Enter the total on Arizona
Form 141AZ, page 2, Schedule A.
If Arizona Form 120S, Schedule K-1(NR), shows a loss,
you may only claim such losses on your Arizona
nonresident return to the extent:
• Those losses are included in:
o The federal adjusted gross income of an
individual, or
o The federal taxable income of a trust or an estate.
• The loss is not considered a passive activity loss for
federal purposes. (If it is, the loss will be treated as a
passive activity loss for Arizona purposes.)
If the S Corporation passes through to you a passive
activity loss derived from Arizona sources:
• Do not begin your Arizona return with the amounts
shown in column (c) of your Arizona Form 120S,
Schedule K-1(NR).
• You must first determine if any portion of the loss has
been limited on your federal return due to federal
passive activity loss rules.
In addition:
• Only the amount of passive activity loss derived from
Arizona sources will be allowed on the Arizona
return.
• Any portion of the passive activity loss not allowed on
the federal return due to passive activity loss
limitations will be limited on the Arizona return.
• That portion of the passive activity loss derived from
Arizona sources required to be carried forward for
federal purposes will be carried forward for Arizona
purposes.
NOTE: The amount of Internal Revenue Code § 179
expense deductible is limited to the Arizona portion of the
amount deducted on federal Form 1040, Schedule E.

Part 2 - Net Capital Gain (Loss) From Investment
in a Qualified Small Business – Information
Schedule
Arizona allows individuals, estates, and trusts a subtraction
from Arizona gross income for any net capital gain derived
from investment in a qualified small business if :
• The gain is included in:
o The individual’s federal adjusted gross income, or
o The estate or trust’s federal taxable income, and

Arizona Form
120S Schedule K-1(NR)

The business in which the S Corporation invested is
determined to be a qualified small business by the
Arizona Commerce Authority.
A shareholder that is a pass-through entity (estate or trust)
will need this information to:
• Calculate its subtraction for the estate or trust, or
• Complete Arizona Form 141AZ, Schedule K-1, or
Schedule K-1(NR), for each beneficiary.
Line 14
Column (c) is your share of net capital gain (loss) from
investment in a qualified small business that is apportioned
to Arizona. To determine if you qualify to take this
subtraction, see the instructions for Arizona Form 140NR.

•

Part 3 - Net Capital Gain (Loss) From the Exchange
of Legal Tender – Information Schedule
For taxable years beginning from and after December 31,
2017, Arizona allows the exclusion from gross income the
amount of net capital gain (loss) derived from the exchange
of one kind of legal tender for another kind of legal tender.
(a) “Legal tender” means a medium of exchange, including
specie that is authorized by the United States
Constitution or Congress for the payment of debts,
public charges, taxes and dues.
(b) “Specie” means coins having precious metal content.
Line 15Column (c) is your share of net capital gain (loss) from the
exchange of legal tender that is apportioned to Arizona.

Part 4 - Net Long-Term Capital Gain Subtraction –
Information Schedule

Arizona allows individuals, estates, and trusts a subtraction
from Arizona gross income for a percentage of any net longterm capital gain if:
• The gain arises from assets acquired after December 31,
2011.
• The gain is included in:
o The individual’s federal adjusted gross income, or
o The estate or trust’s federal taxable income.
In addition:
• Only include net long-term gains if you can verify the
asset was acquired after December 31, 2011.
• If you cannot verify the asset was acquired after
December 31, 2011, treat it as a capital gain asset
acquired before January 1, 2012.
• An asset acquired by gift or inheritance is considered
acquired on the date it was acquired by the gift-giver, or
the deceased.
A shareholder that is a pass-through entity (estate or trust)
will need this information to:
• Calculate its subtraction, or,
• Complete Arizona Form 141AZ, Schedule K-1, or
Schedule K-1(NR), for each beneficiary.
Line 16
Line 16, column (d) is your share of net long-term capital
gain (loss) from assets acquired after December 31, 2011.

•

Line 17
Line 17 is your share of the S Corporation’s net long-term
capital gain from investment in a qualified small business
that is included in the amount on line 16, column (d). The
amount on this line cannot be included in your subtraction
for any net long-term capital gain from assets acquired
after December 31, 2011.
For more information, see the instructions for Arizona Form
140NR or 141AZ.

•
•
•

Line 18
Line 18 is your share of the S Corporation’s net long-term
capital gain from the exchange of legal tender that is
included in the amount on line 16, column (d). The
amount on this line cannot be included in your subtraction
for any net long-term capital gain from assets acquired
after December 31, 2011.

Part 6 – Shareholder’s Share of the S Corporation’s
Pass-Through Entity (PTE) Tax Credit
If the S Corporation is making the election to pay tax at the
entity level on its pass-through income AND you as the
nonresident individual or estate and trust shareholder did not
opt out of that election, Part 6 provides you with your prorata share of the pass-through credit.

Worksheet for Long-Term Capital Gain
Subtraction for Assets Acquired After December
31, 2011 (Worksheet)

Line 21

To determine if you qualify for a net long-term capital gain
subtraction on your Arizona income tax return:
• Nonresident shareholder, use only the amount of
Arizona-sourced, net long-term capital gain (loss)
entered on lines 16 through 18, column (d) to figure
the allowable subtraction on the Worksheet included
in the instructions for Arizona Form 140NR.
•

Arizona 120S Schedule K-1(NR)

If you did not make the Small Business Income
election and are filing Arizona Form 140NR, enter this
amount on page 6, line L.
If you did not make the Small Business Income
election and are filing Arizona Form 140PY, enter this
amount on page 6, line V.
If you made the Small Business Income election and
are filing Arizona Form 140NR-SBI, enter this amount
on line 44.
If you made the Small Business Income election and
are filing Arizona Form 140PY-SBI, enter this amount
on line 44.

Line 21 is your share of the pro-rata share of the S
Corporation’s PTE Tax Credit.
Individuals, enter this amount on Credit Form 355, Part 1,
line 2.
Estates and trusts, see the instructions for Form 141AZ,
line 19 to claim this credit.

Nonresident Estate or Trust shareholder, use only
the amount of Arizona-sourced, net long-term
capital gain (loss) entered on lines 16 through 18,
column (d) to complete the Worksheet included in
the instructions for Arizona Form 141AZ. If the net
long-term capital gain (loss) in Part 4 is distributed
to the beneficiaries the Worksheet will assist the
estate or trust in completing the Net Long-Term
Capital Gain Subtraction – Information Schedule on
Arizona Form 141AZ, Schedule K-1, or Schedule
K-1(NR), for each beneficiary.

Line 22
Line 22 is your pro-rata share of the S Corporation’s
Arizona PTE taxes paid in 2022 for taxable year 2022.
Individuals, add this amount back on Form 140NR, page
5, line K or Form 140NR-SBI, line 24.
Estates and trusts, add this amount back on Form 141AZ,
Schedule B, line B3.
Line 23
Line 23 is the shareholder’s pro-rata share of comparable
PTE Taxes paid from other states in 2022 for taxable year
2022.
Individuals, add this amount back on Form 140NR, page
5, line K or Form 140NR-SBI, line 24.
Estates and trusts, add this amount back on Form 141AZ,
Schedule B, line B3.

Part 5 – Marijuana Establishments Only –
Information Schedule

If the S Corporation is licensed by ADHS as a Marijuana
Establishment, a Marijuana Testing Facility, or as a Dual
Licensee that made the election to operate on a for-profit
basis, Arizona permits the S Corporation to deduct its
federal disallowed expenses in computing its Arizona
taxable income.

Line 19

Line 19 is the S Corporation’s disallowed federal expenses
from the operation of the Marijuana Establishment.

Line 20

Line 20 is your share of the S Corporation’s disallowed
federal expenses from the operation of the Marijuana
Establishment. Enter this amount on your Arizona income
tax return.

2