North Carolina Individual Income Tax

[cbaxter]

I am a Georgia accountant working on a North Carolina resident income tax return.

This gentleman has a K-1 with a $467,038 federal loss.  The NC K-1 has a $253,802 bonus depreciation adjustment.  Very little of the loss is allowed on his federal return because he is a passive investor.  However, the NC module of Pro Series is adding back 85% of $253,802 as an adjustment.  I called technical support and told them that is not correct and they told me that it was.  Does anyone here agree with the Pro Series “Expert”?

If the company had not claimed bonus depreciation and had a federal loss of around $250k, there would have been no adjustment for NC.  This would have resulted in the small federal loss being allowed by NC instead of the $250,000 of income presently calculated by Pro Series.  I always tell clients that common sense does not necessarily apply to tax law but that result is absurd. 

The Georgia module uses a proportional adjustment.  It simply follows that NC would as well.

I would appreciate any comments to help me resolve this issue.