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.