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Michigan Business Tax
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B9. If an individual owns 100% of an S corporation law practice with gross receipts of $500,000, net income of $100,000 after wages of $250,000, and also has the following income not related to the S corporation or any other trade or business: dividends - $100,000, interest $250,000, capital gain $750,000, and pension of $100,000. Is he liable for the MBT taxes on a combined basis as an individual and owner of a S corporation?
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Answer:
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The definitions of "business income" and "gross receipts" as used in the MBT act were amended on December 1, 2007 by PA 145. Under the new definitions, personal investment income, gains from the sale of personal assets, and other income received by an individual not specifically derived from a trade or business are not included in the MBT tax bases as defined in sections 201 and 203 (MCL 208.1201 and 208.1203), and are not included gross receipts for purposes of determining the MBT filing thresholds under section 505 (MCL 208.1505).
Therefore, the taxpayer in this example would only consist of the S corporation. The MBT tax liability of the S corporation would be determined by reference to gross receipts of $500,000 and business income of $100,000. The wage, pension, interest, dividend, and capital gain income of the individual owner of the S corporation are not subject to MBT.
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