(1) It is the intent of this section that shareholders of tax-option corporations include in their Wisconsin adjusted gross income their proportionate share of the corporation's tax-option items unless the corporation elects under s. 71.365 (4) (a) not to be a tax-option corporation.
(1m) A tax-option corporation may deduct from its net income all amounts included in the Wisconsin adjusted gross income of its shareholders, the capital gain deduction under s. 71.05 (6) (b) 9. and all amounts not taxable to nonresident shareholders under ss. 71.04 (1) and (4) to (9) and 71.362 . For purposes of this subsection, interest on federal obligations, obligations issued under s. 66.0621 by a local professional baseball park district, a local professional football stadium district, or a local cultural arts district, obligations issued under ss. 66.1201 , 66.1333 , and 66.1335 , obligations issued under s. 234.65 to fund an economic development loan to finance construction, renovation or development of property that would be exempt under s. 70.11 (36) and obligations issued under subch. II of ch. 229 is not included in shareholders' income. The proportionate share of the net loss of a tax-option corporation shall be attributed and made available to shareholders on a Wisconsin basis but subject to the limitation and carry-over rules as prescribed by section 1366 (d) of the Internal Revenue Code. Net operating losses of the corporation to the extent attributed or made available to a shareholder may not be used by the corporation for further tax benefit. For purposes of computing the Wisconsin adjusted gross income of shareholders, tax-option items shall be reported by the shareholders and those tax-option items, including capital gains and losses, shall retain the character they would have if attributed to the corporation, including their character as business income. In computing the tax liability of a shareholder, no credit against gross tax that would be available to the tax-option corporation if it were a nontax-option corporation may be claimed.
(2) A tax-option corporation shall separately state all tax-option items the separate treatment of which may affect the liability of any shareholder for tax under this chapter.
(3)
(a) The tax treatment of all tax-option items shall be determined at the corporate level.
(b) All shareholders of tax-option corporations shall treat tax-option items on their returns under this chapter in a manner consistent with the manner in which those tax-option items are treated on the corporation's Wisconsin income or franchise tax return or shall notify the department of revenue of any inconsistency and the reason for it.