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CITY OF PHILADELPHIA BUSINESS PRIVILEGE TAX REGULATIONS - page 39 / 59

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39 / 59

SECTION 404. NET INCOME METHOD II.

  • (1)

    General.

    • (a)

      Method II Net Income shall be the portion of the taxpayer's adjusted taxable income (or loss) from any business activity as properly returned to and ascertained by the Federal Government prior to giving effect to the exclusion for dividends received and for net operating losses, which is apportioned to Philadelphia, plus the taxpayer's nonbusiness income which is allocated to Philadelphia. The adjustments to taxable income (or loss) are provided in subsections (2)(a) through (2)(f).

    • (b)

      Taxable income as properly returned to the Federal Government means the taxable income (or loss) as should have been reported to the Internal Revenue Service on a tax return form, in accordance with the Internal Revenue Code, the Regulations issued thereunder, applicable rulings and court decisions. In the case of a partnership, joint venture, association, syndicate, pool or similar organization, or an S corporation, taxable income from any business activity as returned to and ascertained by the Federal Government shall mean "Ordinary income (loss)" as reported on Form 1065, U.S. Partnership Return of Income, or on Form 1120S, U.S. Income Tax Return for an S Corporation, subject to the following adjustments to reflect items of income and expense passed through separately on Schedule K-1 to the partners, joint ventures, etc., or shareholders:

An increase for:

(.1) (.2) (.3) (.4) (.5) (.6) (.7) (.8) (.9)

Guaranteed payments to partners. Dividends qualifying for exclusion. Net short-term capital gain. Net long-term capital gain. Net gain from involuntary conversions due to casualty or theft. Other net gain under Section 1231 of the Internal Revenue Code. Interest. Other dividends. Royalties.

(.10) (.11)

Net rental income. Portfolio income.

A decrease for:

(.1) (.2) (.3) (.4)

Net short-term capital loss. Net long-term capital loss. Net loss from involuntary conversions due to casualty or theft. Other net loss under Section 1231 of the Internal Revenue Code.

(i)

(ii)

(Rev. 08/01)

37

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