US Laws, Codes, Statutes & Cases

 
    §  11-509  Deductions  not  subject  to  allocation.  (a) In computing
  unincorporated business taxable income, there shall be allowed  (without
  allocation   under  section  11-508  of  this  chapter)  deductions  for
  reasonable compensation not in  excess  of  five  thousand  dollars  for
  personal services of the proprietor and each partner actively engaged in
  the  unincorporated business, but the aggregate of such deductions shall
  not exceed twenty per centum  of  the  unincorporated  business  taxable
  income  computed  without  the  benefit  of  any  deductions  under this
  subdivision or the  unincorporated  business  exemptions  under  section
  11-510 of this chapter.
    (b) Subject to the conditions provided in paragraphs three and four of
  this  subdivision  at  the  election of the taxpayer there shall also be
  allowed (without allocation under section 11-508 of this chapter) either
  or both of the items set  forth  in  paragraphs  one  and  two  of  this
  subdivision,  except  that  only  one of the items shall be allowed with
  respect to any one item of property.
    (1) Depreciation with respect to any property  such  as  described  in
  paragraphs  three  or  four  of  this  subdivision,  and  subject to the
  conditions  provided  therein,  not  exceeding  twice  the  depreciation
  allowed  with  respect  to  the  same  property  for  federal income tax
  purposes. Such deduction shall be allowed only upon  condition  that  no
  deduction  shall  be  allowed pursuant to section 11-507 of this chapter
  for depreciation of the same property, and the total of  all  deductions
  allowed  pursuant  to  this  paragraph in any taxable year or years with
  respect to any property shall not exceed its cost or other basis and, in
  the case of an  unincorporated  business  carried  on  both  within  and
  without  this city, with respect to property described in paragraph four
  of this subdivision, such total shall not exceed its cost or other basis
  multiplied by (A)  the  percentage  of  the  excess  of  the  taxpayer's
  unincorporated  business  gross  income over its unincorporated business
  deductions allocated  to  this  city,  or  (B)  the  percentage  of  the
  taxpayer's   business  income  allocated  to  this  city,  whichever  is
  applicable, which percentage shall be determined under section 11-508 of
  this chapter for the first year such depreciation is deducted.
    (2) Expenditures paid or incurred during  the  taxable  year  for  the
  construction,  reconstruction,  erection  or acquisition of any property
  such as described in paragraph three or four of  this  subdivision,  and
  subject  to the conditions provided therein, which is used or to be used
  for  purposes  of  research  or  development  in  the  experimental   or
  laboratory  sense.  Such  purposes  shall  not  be deemed to include the
  ordinary testing or inspection of  materials  or  products  for  quality
  control,  efficiency  surveys,  management  studies,  consumer  surveys,
  advertising,  promotions  or  research  in  connection  with   literary,
  historical  or similar projects. Such deduction shall be allowed only on
  condition that, in the case of an  unincorporated  business  carried  on
  both within and without this city, with respect to property described in
  paragraph  four  of this subdivision, such deduction does not exceed the
  expenditures multiplied by (A) the  percentage  of  the  excess  of  the
  taxpayer's  unincorporated business gross income over its unincorporated
  business deductions allocated to this city, or (B) the percentage of the
  taxpayer's  business  income  allocated  to  this  city,  whichever   is
  applicable, which percentage shall be determined under section 11-508 of
  this chapter for the first year such depreciation is deducted, and that,
  for  the  taxable  year  and  all succeeding taxable years, no deduction
  shall be allowed pursuant to section 11-507 of this chapter  on  account
  of such expenditures or on account of depreciation of the same property,
  except to the extent that its basis may be attributable to factors other
  than  such expenditures, or in case a deduction is allowable pursuant to

  this paragraph for only a part of such expenditures, on  condition  that
  any  deduction  allowable  for federal income tax purposes on account of
  such expenditures or on account of depreciation  of  the  same  property
  shall be proportionately reduced in determining the deductions allowable
  pursuant  to section 11-507 of this chapter for the taxable year and all
  succeeding taxable years. With respect to property which is used  or  to
  be  used  for research and development only in part, or during only part
  of its useful life, the deduction allowable pursuant to  this  paragraph
  shall  be  limited  to a proportionate part of the expenditures relating
  thereto. If a  deduction  shall  have  been  allowed  pursuant  to  this
  paragraph  for  all  or  part  of  such expenditures with respect to any
  property, and such property is used for purposes other than research and
  development to a greater extent than originally reported,  the  taxpayer
  shall  report  such  use  in the taxpayer's return for the first taxable
  year during which  it  occurs,  and  the  commissioner  of  finance  may
  recompute  the  tax  for  the year or years for which such deduction was
  allowed,  and  may  assess  any  additional  tax  resulting  from   such
  recomputation within the time fixed by subdivision (c) of section 11-523
  of this chapter.
    (3)  For  purposes  of this paragraph, such deduction shall be allowed
  only with respect to tangible property which is depreciable pursuant  to
  section  one  hundred sixty-seven of the internal revenue code, having a
  situs in the city and used in the  taxpayer's  trade  or  business,  (A)
  constructed,  reconstructed  or  erected  after  December  thirty-first,
  nineteen hundred sixty-five, pursuant to a contract  which  was,  on  or
  before  December  thirty-first, nineteen hundred sixty-seven, and at all
  times thereafter, binding on the taxpayer  or,  property,  the  physical
  construction,  reconstruction  or  erection  of which began on or before
  December thirty-first, nineteen hundred sixty-seven or which began after
  such  date  pursuant  to  an  order  placed  on   or   before   December
  thirty-first,  nineteen  hundred sixty-seven, and then only with respect
  to that portion of the basis thereof or the expenditure relating thereto
  which is properly attributable to such construction,  reconstruction  or
  erection  after  December  thirty-first, nineteen hundred sixty-five, or
  (B) acquired after December thirty-first, nineteen  hundred  sixty-five,
  pursuant  to  a  contract which was, on or before December thirty-first,
  nineteen hundred sixty-seven, and at all times  thereafter,  binding  on
  the  taxpayer  or  pursuant  to  an  order  placed on or before December
  thirty-first, nineteen hundred sixty-seven, by purchase  as  defined  in
  section  one  hundred  seventy-nine (d) of the internal revenue code, if
  the original use of such property commenced with the taxpayer, commenced
  in the city and commenced after December thirty-first, nineteen  hundred
  sixty-five  or  (C)  acquired,  constructed,  reconstructed,  or erected
  subsequent to December thirty-first, nineteen  hundred  sixty-seven,  if
  such  acquisition,  construction, reconstruction or erection is pursuant
  to a plan of the taxpayer which was in existence December  thirty-first,
  nineteen  hundred sixty-seven and not thereafter substantially modified,
  and such acquisition, construction,  reconstruction  or  erection  would
  qualify under the rules in paragraph four, five or six of subsection (h)
  of  section  forty-eight  of  the  internal  revenue  code  provided all
  references in such paragraphs four, five and six to  the  dates  October
  nine,  nineteen  hundred  sixty-six,  and  October ten, nineteen hundred
  sixty-six, shall be read  as  December  thirty-first,  nineteen  hundred
  sixty-seven.  A taxpayer shall be allowed a deduction under subparagraph
  (A), (B) or (C) of this paragraph only if the tangible property shall be
  delivered or the  construction,  reconstruction  or  erection  shall  be
  completed   on   or   before  December  thirty-first,  nineteen  hundred
  sixty-nine, except in the case of tangible property which  is  acquired,

  constructed,  reconstructed or erected pursuant to a contract which was,
  on or before December thirty-first, nineteen hundred sixty-seven, and at
  all times thereafter, binding on the taxpayer. However, for any  taxable
  year  beginning on or after January first, nineteen hundred sixty-eight,
  a taxpayer shall not be allowed a deduction under paragraph one of  this
  subdivision  with  respect  to  tangible personal property leased to any
  other person or corporation. For purposes of the preceding sentence, any
  contract or agreement to lease or rent or for  a  license  to  use  such
  property  shall  be considered a lease. With respect to property which a
  taxpayer uses for purposes other than leasing for part of a taxable year
  and leases for a part of a taxable year, a deduction under paragraph one
  may be taken in proportion to the part of the year such property is used
  by the taxpayer.
    (4) For purposes of this paragraph, such deductions shall  be  allowed
  only  with respect to tangible property which is depreciable pursuant to
  section one hundred sixty-seven of the internal revenue code,  having  a
  situs in this city and used in the taxpayer's trade or business, (A) the
  construction,  reconstruction,  or  erection of which is completed after
  December thirty-first, nineteen hundred sixty-seven, and then only  with
  respect  to  that  portion  of  the  basis  thereof  or the expenditures
  relating thereto which is properly attributable  to  such  construction,
  reconstruction or erection after December thirty-first, nineteen hundred
  sixty-three,  or  (B)  acquired  after  December  thirty-first, nineteen
  hundred sixty-seven, by purchase  as  defined  in  section  one  hundred
  seventy-nine  (d)  of  the internal revenue code, if the original use of
  such property commenced with the taxpayer, commenced in  this  city  and
  commenced  after  December  thirty-first,  nineteen  hundred sixty-five.
  Provided, however, a deduction under paragraph one of  this  subdivision
  shall  be  allowed  with respect to property described in this paragraph
  only on condition that such property shall be principally  used  by  the
  taxpayer  in  the  production  of  goods  by  manufacturing; processing;
  assembling;  refining;   mining;   extracting;   farming;   agriculture;
  horticulture;  floriculture;  viticulture  or  commercial  fishing.  For
  purposes of the preceding sentence, manufacturing shall mean the process
  of working raw materials into wares suitable for use or which gives  new
  shapes,  new  qualities  or new combinations to matter which already has
  gone through some artificial process by the  use  of  machinery,  tools,
  appliances, and other similar equipment. Property used in the production
  of  goods  shall include machinery, equipment or other tangible property
  which is principally used in the repair and service of other  machinery,
  equipment  or other tangible property used principally in the production
  of goods and shall include all  facilities  used  in  the  manufacturing
  operation, including storage of material to be used in manufacturing and
  of  the  products  that are manufactured. At the option of the taxpayer,
  air and water pollution control facilities which  qualify  for  elective
  deductions  under subdivision nine of section 11-507 of this chapter may
  be treated,  for  purposes  of  this  paragraph,  as  tangible  property
  principally   used   in   the  production  of  goods  by  manufacturing;
  processing;   assembling;   refining;   mining;   extracting;   farming;
  agriculture;   horticulture;  floriculture;  viticulture  or  commercial
  fishing, in  which  event,  a  deduction  shall  not  be  allowed  under
  subdivision  nine  of  section  11-507 of this chapter. However, for any
  taxable year beginning on  or  after  January  first,  nineteen  hundred
  sixty-eight, a taxpayer shall not be allowed a deduction under paragraph
  one  of  this  subdivision  with  respect  to tangible personal property
  leased to any other person or corporation. For purposes of the preceding
  sentence, any contract or agreement to lease or rent or for a license to
  use such property shall be considered a lease. With respect to  property

  which  a  taxpayer  uses  for  purposes other than leasing for part of a
  taxable year and leases for a part of a taxable year, a deduction  under
  paragraph  one  shall  be  allowed in proportion to the part of the year
  such property is used by the taxpayer.
    (5)  If the deductions allowable for any taxable year pursuant to this
  subdivision  exceed  the  taxpayer's  unincorporated  business   taxable
  income,  determined without the allowance of such deductions, the excess
  may be carried over to the following taxable year or years  and  may  be
  deducted  (without  allocation  under section 11-508 of this chapter) in
  computing unincorporated business taxable income for such year or years.
    (6) In any taxable year when property is sold  or  otherwise  disposed
  of,  with  respect  to  which  a  deduction has been allowed pursuant to
  paragraph one or two of this subdivision, the  basis  of  such  property
  shall be adjusted to reflect the deductions so allowed, and if the basis
  as so adjusted is lower than the adjusted basis of the same property for
  federal  income  tax  purposes,  there  shall  be added to federal gross
  income the amount of the difference between such adjusted bases.