2006 New York Code - Unincorporated Business Gross Income.



 
    §  11-506  Unincorporated  business  gross  income.  (a)  (1) General.
  Unincorporated business gross income of an unincorporated business means
  the sum of the items of income and gain of  the  business,  of  whatever
  kind  and  in  whatever  form  paid,  includible in gross income for the
  taxable year for federal income tax purposes, including income and  gain
  from  any  property employed in the business, or from liquidation of the
  business, or from collection of installment obligations of the business,
  or from the sale or other disposition by an unincorporated entity of  an
  interest  in  another  unincorporated  entity  if and to the extent such
  income or gain is attributable  to  a  trade,  business,  profession  or
  occupation  carried  on  in  whole  or in part in the city by such other
  unincorporated entity, with the modifications specified in this section.
    (2) The character of a partner's distributive share of  gross  income,
  gains,  losses  and  deductions  of  an  unincorporated  entity shall be
  determined as if such gross income, gains, losses  and  deductions  were
  realized  directly by such partner regardless of how the interest in the
  unincorporated  entity  was  acquired  and  regardless  of  whether  the
  distributive share is proportionate to the partner's capital interest in
  the  unincorporated  entity, provided, however, this paragraph shall not
  apply to  payments  to  a  partner  treated  as  occurring  between  the
  unincorporated  entity  and one who is not a partner under section seven
  hundred seven of the internal revenue code, and provided, further,  this
  paragraph  shall  not  affect the determination of whether gross income,
  gains, losses or deductions of an unincorporated entity are  subject  to
  the  tax  imposed  by  this  chapter  as realized from an unincorporated
  business.
    (b) Modifications increasing federal  gross  income.  There  shall  be
  added  to  federal  gross  income  of  the  business the following items
  attributable to the business:
    (1) Interest income on obligations of any state other than this state,
  or of a political subdivision of any such other state unless created  by
  compact or agreement to which this state is a party.
    (2)  Interest  or  dividend income on obligations or securities of any
  authority, commission, or instrumentality of the  United  States,  which
  the  laws  of  the  United States exempt from federal income tax but not
  from state or local income taxes.
    (3) In the case of a taxpayer who has exercised the election permitted
  by subdivision (b) of section 11-509 of this chapter, if the property to
  which such election relates was sold or otherwise disposed of during the
  taxable year, the amount required by said subdivision  to  be  added  to
  federal gross income.
    (4) The entire amount allowable as an exclusion or deduction for stock
  transfer  taxes  imposed by article twelve of the tax law in determining
  federal gross income but only to the extent that such taxes are incurred
  and paid in market making transactions.
    (5) The amount allowed as an exclusion or deduction for sales and  use
  taxes  imposed  by  section  eleven  hundred  seven  of  the  tax law in
  determining federal gross income but only such portion of such exclusion
  or deduction which is not in excess of the amount of the credit  allowed
  pursuant to subdivision (d) of section 11-503 of this chapter.
    (6)  The  amount  allowed  as  an  exclusion  or  deduction as rent in
  determining federal gross income but only such portion of such exclusion
  or deduction which is not in excess of the amount of the credit  allowed
  pursuant to subdivision (e) of section 11-503 of this chapter.
    (7)  The  amount  allowed  as an exclusion or deduction in determining
  federal gross  income  but  only  such  portion  of  such  exclusion  or
  deduction  which  is  not  in excess of the amount of the credit allowed
  pursuant to subdivision (f) of section 11-503 of this chapter.

(8) For taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount which would properly be includible for federal income tax purposes had the taxpayer not made the election permitted pursuant to such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four. (9) Upon the disposition of property to which subdivision fifteen of section 11-507 of this chapter applies, the amount, if any, by which the aggregate of the amounts described in such subdivision fifteen attributable to such property exceeds the aggregate of the amounts described in subdivision fourteen of section 11-507 of this chapter attributable to such property. (10) The amount allowed as an exclusion or deduction for sales and use taxes imposed by section eleven hundred seven of the tax law in determining federal gross income, but only such portion of such exclusion or deduction which is not in excess of the amount of the credit allowed pursuant to subdivision (g) of section 11-503 of this chapter. (12) The amount allowed as an exclusion or deduction for sales and use taxes imposed by section eleven hundred seven of the tax law (or for any interest imposed in connection therewith) in determining federal gross income, but only such portion of such exclusion or deduction which is not in excess of the amount of the credit allowed pursuant to subdivision (k) of section 11-503 of this chapter. (13) Notwithstanding any other provision of this chapter to the contrary, the amount allowed as an exclusion or deduction in determining federal gross income of any loss, including but not limited to, losses from notional principal contracts, losses, other than as a dealer, from the holding, sale, disposition, assumption, offset or termination of a position in, property, as defined in paragraph one of subdivision (c) of section 11-502 of this chapter, or other substantially similar losses from ordinary and routine trading or investment activity to the extent determined by the commissioner of finance, realized in connection with activities described in paragraph two of subdivision (c) of section 11-502 of this chapter if, and to the extent that, such activities are not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of subdivision (c) of section 11-502 of this chapter. (14) Notwithstanding any other provision of this chapter to the contrary, in the case of a taxpayer that is an unincorporated entity described in subparagraph (B) of paragraph four of subdivision (c) of section 11-502 of this chapter, the amount allowed as an exclusion or deduction in determining federal gross income of any loss realized from the sale or other disposition of an interest in another unincorporated entity if, and to the extent that, such loss is attributable to activities of such other unincorporated entity not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of subdivision (c) of section 11-502 of this chapter. (15) Notwithstanding any other provision of this chapter to the contrary, the amount allowed as an exclusion or deduction in determining federal gross income of any loss realized from the holding, leasing or managing of real property if, and to the extent that, such holding, leasing or managing of real property is not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of subdivision (d) of section 11-502 of this chapter.
(16) Notwithstanding any other provision of this chapter to the contrary, the amount allowed as an exclusion or deduction in determining federal gross income of any loss realized from the provision by an owner, lessee or fiduciary holding, leasing or managing real property of the service of parking, garaging or storing of motor vehicles on a monthly or longer term basis to tenants at such real property if, and to the extent that, the provision of such services to such tenants is not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of subdivision (d) of section 11-502 of this chapter. (c) Modifications reducing federal gross income. There shall be subtracted from federal gross income of the business the following items attributable to the business: (1) Interest income on obligations of the United States and its possessions to the extent includible in gross income for federal income tax purposes; (2) Interest or dividend income on obligations or securities of any authority, commission or instrumentality of the United States to the extent includible in gross income for federal income tax purposes but exempt from state or local income taxes under the laws of the United States; (3) Interest or dividend income on obligations or securities to the extent exempt from income tax under the laws of the city or this state authorizing the issuance of such obligations or securities but includible in gross income for federal income tax purposes; (3-a) Fifty percent of dividends to the extent includible in gross income for federal income tax purposes and not subtracted under paragraph two or three of this subdivision, provided, however, that there shall be no subtraction pursuant to this paragraph for any portion of a dividend from stock with respect to which a dividend deduction would be disallowed by subsection (c) of section two hundred forty-six of the internal revenue code if the unincorporated business were a corporation; (4) The amount of any refund or credit for overpayment of income taxes imposed by the city, this state or any other taxing jurisdiction, or the tax imposed by article thirteen-A of the tax law, to the extent properly included in gross income for federal tax purposes; (5) With respect to gain derived from the sale or other disposition of any property acquired prior to January first, nineteen hundred sixty-six, except property described in subsections one and four of section twelve hundred twenty-one of the internal revenue code, the difference between: (a) the amount of gain included in federal gross income with respect to each such property, and (b) the amount of gain (if smaller than the amount described in subparagraph (a) of this paragraph) that would be included in federal gross income with respect to each such property if the federal adjusted basis of such property on the date of the sale or other disposition had been equal to its fair market value on January first, nineteen hundred sixty-six, or the date of its sale or other disposition prior to January first, nineteen hundred sixty-six, plus or minus all adjustments to basis made with respect to such property for federal income tax purposes for periods on and after January first, nineteen hundred sixty-six; provided, however, that the total modification provided by this subparagraph shall not exceed the taxpayer's net gain from the sale or other disposition of all such property. (6) For taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount properly includible in federal gross income solely as a result of an election made pursuant to the provisions of such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four. (7) Upon the disposition of property to which subdivision fifteen of section 11-507 of this chapter applies, the amount, if any, by which the aggregate of the amounts described in subdivision fourteen of section 11-507 of this chapter attributable to such property exceeds the aggregate of the amounts described in subdivision fifteen of section 11-507 of this chapter attributable to such property. (8) Notwithstanding any other provision of this chapter to the contrary, the amount of any income or gain (to the extent includible in gross income for federal income tax purposes) realized from the holding, leasing or managing of real property if, and to the extent that, such holding, leasing or managing of real property is not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of subdivision (d) of section 11-502 of this chapter. (9) Notwithstanding any other provision of this chapter to the contrary, the amount of any income or gain (to the extent includible in gross income for federal income tax purposes), including but not limited to, dividends, interest, payments with respect to securities loans, income from notional principal contracts, or income and gains, other than as a dealer, from the holding, sale, disposition, assumption, offset or termination of a position in, property, as defined in paragraph one of subdivision (c) of section 11-502 of this chapter, or other substantially similar income from ordinary and routine trading or investment activity to the extent determined by the commissioner of finance, realized in connection with activities described in paragraph two of subdivision (c) of section 11-502 of this chapter if, and to the extent that, such activities are not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of subdivision (c) of section 11-502 of this chapter. (10) Notwithstanding any other provision of this chapter to the contrary, in the case of a taxpayer that is an unincorporated entity described in subparagraph (B) of paragraph four of subdivision (c) of section 11-502 of this chapter, the amount of any income or gain (to the extent includible in gross income for federal income tax purposes) realized from the sale or other disposition of an interest in another unincorporated entity if, and to the extent that, such income or gain is attributable to activities of such other unincorporated entity not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of subdivision (c) of section 11-502 of this chapter. (11) Notwithstanding any other provision of this chapter to the contrary, the amount of any income or gain (to the extent includible in gross income for federal income tax purposes) realized from the provision by an owner, lessee or fiduciary holding, leasing or managing real property of the service of parking, garaging or storing of motor vehicles on a monthly or longer term basis to tenants at such real property if, and to the extent that, the provision of such services to such tenants is not deemed an unincorporated business pursuant to the provisions of subdivision (d) of section 11-502 of this chapter. (d) Upon the disposition of property to which subdivisions twenty and twenty-one of section 11-507 apply, the amount of any gain or loss includible in entire net income shall be adjusted to reflect the modifications provided in such subdivisions attributable to such property.
(e) Related members expense add back and income exclusion. (1) Definitions. (A) Related member or members. For purposes of this subdivision, the term related member or members means a person, corporation, or other entity, including an entity that is treated as a partnership or other pass-through vehicle for purposes of federal taxation, whether such person, corporation or entity is a taxpayer or not, where one such person, corporation, or entity, or set of related persons, corporations or entities, directly or indirectly owns or controls a controlling interest in another entity. Such entity or entities may include all taxpayers under this title. (B) Controlling interest. A controlling interest shall mean (i) in the case of a corporation, either thirty percent or more of the total combined voting power of all classes of stock of such corporation, or thirty percent or more of the capital, profits or beneficial interest in such voting stock of such corporation, and (ii) in the case of a partnership, association, trust or other entity, thirty percent or more of the capital, profits or beneficial interest in such partnership, association, trust or other entity. (C) Royalty payments. Royalty payments are payments directly connected to the acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of licenses, trademarks, copyrights, trade names, trade dress, service marks, mask works, trade secrets, patents and any other similar types of intangible assets as determined by the commissioner of finance, and includes amounts allowable as interest deductions under section one hundred sixty-three of the internal revenue code to the extent such amounts are directly or indirectly for, related to or in connection with the acquisition, use, maintenance or management, ownership, sale, exchange or disposition of such intangible assets. (D) Valid business purpose. A valid business purpose is one or more business purposes, other than the avoidance or reduction of taxation, which alone or in combination constitute the primary motivation for some business activity or transaction, which activity or transaction changes in a meaningful way, apart from tax effects, the economic position of the taxpayer. The economic position of the taxpayer includes an increase in the market share of the taxpayer, or the entry by the taxpayer into new business markets. (2) Royalty expense add backs. (A) For the purpose of computing unincorporated business entire net income, a taxpayer must add back royalty payments to a related member during the taxable year to the extent deductible in calculating federal taxable income. (B) The add back of royalty payments shall not be required if and to the extent that such payments meet either of the following conditions: (i) the related member during the same taxable year directly or indirectly paid or incurred the amount to a person or entity that is not a related member, and such transaction was done for a valid business and the payments are made at arm's length; (ii) the royalty payments are paid or incurred to a related member organized under the laws of a country other than the United States, are subject to a comprehensive income tax treaty between such country and the United States, and are taxed in such country at a tax rate at least equal to that imposed by this state. (3) Royalty income exclusions. For the purpose of computing unincorporated business entire net income, a taxpayer shall be allowed to deduct royalty payments directly or indirectly received from a related member during the taxable year to the extent included in the taxpayer's federal taxable income unless such royalty payments would not
be required to be added back under paragraph two of this subdivision or other similar provision in this chapter. (f) Upon the disposition of property to which subdivisions twenty-three and twenty-four of section 11-507 of this chapter apply, the amount of any gain or loss includible in unincorporated business gross income shall be adjusted to reflect the modifications provided in such subdivisions attributable to such property.

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