(a) In determining the Connecticut adjusted gross income of a resident partner of a partnership or a resident shareholder of an S corporation, any modification described in section 12-701 which relates to an item of partnership or S corporation income, gain, loss or deduction shall be made in accordance with the partner's distributive share or a shareholder's pro rata share, for federal income tax purposes, of the item to which the modification relates. Where a partner's distributive share or a shareholder's pro rata share of any such item is not required to be taken into account separately for federal income tax purposes, the partner's or shareholder's share of such item shall be determined in accordance with his share, for federal income tax purposes, of partnership or S corporation taxable income or loss generally.
(b) Each item of partnership and S corporation income, gain, loss or deduction shall have the same character for a partner or shareholder under this chapter as for federal income tax purposes. Where an item is not characterized for federal income tax purposes, it shall have the same character for a partner or shareholder as if it were realized directly from the source from which it was realized by the partnership or S corporation or as if it was incurred in the same manner as it was incurred by the partnership or S corporation.
(c) Where a partner's distributive share of an item of partnership income, gain, loss or deduction is determined for federal income tax purposes by special provision in the partnership agreement with respect to such item, and where the principal purpose of such provision is the avoidance or evasion of tax under this chapter, the partner's distributive share of such item, and any modification required with respect thereto, shall be determined as if the partnership agreement made no special provision with respect to such item.
(June Sp. Sess. P.A. 91-3, S. 66, 168; May Sp. Sess. P.A. 92-5, S. 11, 37.)
History: June Sp. Sess. P.A. 91-3, S. 66, effective August 22, 1991, and applicable to taxable years of taxpayers commencing on or after January 1, 1991; May Sp. Sess. P.A. 92-5 made a technical change, effective June 19, 1992, and applicable to taxable years of taxpayers commencing January 1, 1992.