North Carolina Administrative Code › Title 17 - REVENUE › Chapter 06 - INDIVIDUAL INCOME TAX › Subchapter B › Section .3500 - PARTNERSHIPS › Section 06B .3529 - INTEREST INCOME PASSED THROUGH TO PARTNERS

Current through Register Vol. 39, No. 2, July 15, 2024
(a) Although the interest income passed
											  through to a partner in a partnership retains its same character as when received by the partnership, the
											  expenses incurred in earning interest income shall be either deductible by the partnership and net interest
											  income after expenses shall be reflected in the partner's pro rata share of the income of the partnership, or
											  not deductible by the partnership and interest income before expenses shall be reflected in the partner's pro
											  rata share of the income of the partnership.
(b) Net interest
											  income shall be reported if the activities are considered trade or business activities under federal law and
											  interest income before expenses shall be reported if the activities are considered investment activities
											  under federal law. If the activities are considered investment activities, the expenses incurred in earning
											  that income shall be reported by the partnership to its partners as a separately stated item and shall be
											  deducted by the partner to the extent allowable on the partner's income tax return.
(c) For interest income subject to federal income tax and considered trade
											  or business activities, the partner's federal gross income shall include the net interest income after
											  expenses incurred in earning the income. If that interest income is deductible from federal adjusted gross
											  income pursuant to G.S.
											  105-153.5(b), the individual partner shall deduct the net
											  income on the North Carolina return. For interest income subject to federal income tax and considered
											  investment activities, the partner's federal gross income includes the interest income before expenses
											  incurred in earning the income. If that interest income is deductible from federal adjusted gross income
											  pursuant to G.S.
											  105-153.5(b), the individual partner shall deduct the
											  income before expenses on the North Carolina return. No addition shall be made for the expenses incurred in
											  earning that income to the extent those expenses are deductible by the individual partner in arriving at
											  federal adjusted gross income.
(d) Interest income not subject to
											  federal income tax is not included in the partner's federal adjusted gross income. For interest income not
											  subject to federal tax but required to be added to federal adjusted gross income pursuant to
											  G.S.
											  105-153.5(c), the individual partner shall add the total
											  interest income on the North Carolina return. No deduction shall be made for expenses incurred in earning
											  that income if the expenses are not deductible in arriving at federal adjusted gross income.
Authority
													 G.S.
													 105-153.5(b);
													 105-153.5(c);
													 105-154;
													 105-262;
Eff. February 3, 1992;
Readopted Eff. May 1, 2016.