§ 28-05 Unincorporated Business Gross Income.
RCNY § 28-05
(a)(1) General. (Administrative Code § 11-506(a)). Subject to the modifications prescribed below in 19 RCNY § 28-05(b) and (c), the unincorporated business gross income of an unincorporated business engaged in or being liquidated by an individual or unincorporated entity means the sum of the items of income and gain (of whatever kind and in whatever form paid) that are includible in the gross income of the individual or unincorporated entity for Federal income tax purposes for the taxable year and that are derived from the carrying on or liquidation of the business or from any source whatever connected therewith, including, without limitation, income and gain (A) from any property of the individual or unincorporated entity, or a member thereof, employed in the business, (B) from liquidation of the business or disposition of the assets thereof, (C) from collection or other disposition of installment obligations of the business without regard to when such obligations were acquired, or (D) in the case of an unincorporated entity, from the sale or other disposition 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. An individual member of a partnership who also carries on his or her own separate and independent unincorporated business is not required or permitted to include his distributive share of partnership income or his or her gain or loss on the sale or other disposition of his or her interest in the partnership in computing his or her separate unincorporated business gross income. Example: Doctor A is a member of a medical partnership which provides medical services to members of a group health plan. In addition, Doctor A carries on his own separate and independent medical practice. Doctor A may not include his distributive share of partnership income in his computation of his own unincorporated business gross income. (Furthermore, the medical partnership may not claim the statutory additional exemption described in 19 RCNY § 28-09(b) for the amount distributed to Doctor A and Doctor A is not entitled to a credit against his unincorporated business tax liability for any unincorporated business tax paid by the medical partnership for its taxable years beginning on or after July 1, 1994. See 19 RCNY § 28-09(b)(1) and 19 RCNY § 28-03(d).
(2)For taxable years beginning on or after January 1, 1996, 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 to the extent permitted for federal income tax purposes 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 (2) shall not apply to payments to a partner treated as occurring between the unincorporated entity and one who is not a partner under Internal Revenue Code § 707, and provided, further, this paragraph (2) shall not affect the determination of whether gross income, gains, losses, or deductions of an unincorporated entity are subject to the tax imposed under Chapter 5 of Title 11 of the Administrative Code. This paragraph (2) is illustrated by the following: Example: Partnership X is the sole general partner in Partnership A. X contributed one percent of the capital of Partnership A. X is responsible for the day to day management of the business of Partnership A, which is the purchase and sale of stocks and securities for the account of Partnership A. X is paid a fee each year of $100,000 qualifying as a guaranteed payment under Internal Revenue Code § 707. In addition, X is entitled to receive 20 percent of the income, gains, losses, and deductions of Partnership A. X's entire distributive share of the income, gains, losses, and deductions of Partnership A retains its character in X's hands, i.e., as dividends, interest and gains and losses from stocks and securities. X's $100,000 fee is compensation for services rendered and X's performance of those services may be considered an unincorporated business under the provisions of 19 RCNY § 28-02 without regard to this paragraph (2).
(b)Modifications increasing federal gross income. (Administrative Code § 11-506(b)). The Federal gross income of the unincorporated business determined under 19 RCNY § 28-05(a) shall be increased by the following items, to the extent such items are attributable to the business: (1) Interest income on obligations of any State of the United States, other than New York State, or of a political subdivision of any such other State, unless created by an agreement or compact to which the State of New York 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) The amount determined under 19 RCNY § 28-08(b) in respect of certain property sold or otherwise disposed of during the year, which was subject to an election exercised by the taxpayer with regard to a special deduction for depreciation or for an expenditure for property used for research or development purposes in accordance with said section; (4) For taxable years commencing on or after August 1, 1977, the entire amount allowable as an exclusion or deduction for stock transfer taxes imposed by Article 12 of the State Tax Law in determining Federal gross income, but only to the extent that such taxes are incurred and paid in market making transactions as defined in § 11-503(c) of the Administrative Code; (5) The amount allowed as an exclusion or deduction for sales and use taxes imposed by § 1107 of the State 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 credits allowed under 19 RCNY § 28-03(c)(3); (6) The amount allowed as an exclusion or deduction for rent in determining Federal gross income but only such portion of such exclusion or deduction which is not in excess of the amount of credit allowed under 19 RCNY § 28-03(c)(4); (7) The amount allowed as an exclusion or deduction for relocation expenses 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 under 19 RCNY § 28-03(c)(4); (8) For taxable years beginning after December 31, 1981, any amount which would properly be includible in federal gross income had the taxpayer not made the election permitted pursuant to § 168(f)(8) of the Internal Revenue Code as it was in effect for safe harbor lease agreements entered into prior to January 1, 1984, except with respect to property which is a qualified mass commuting vehicle described in § 163(f)(8)(D) of the Internal Revenue Code; (9) Upon the disposition of recovery property to which 19 RCNY § 28-06(n) applies, the amount, if any, by which the aggregate of the deductions for depreciation attributable to such property allowable pursuant to such 19 RCNY § 28-06(n) exceeds the aggregate accelerated cost recovery system deduction attributable to such property, described in 19 RCNY § 28-06(m); (10) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, the amount allowed as an exclusion or deduction in determining federal gross income or any loss, including but not limited to, losses from notional principal contracts, losses, other than losses realized by the taxpayer as a dealer as defined in 19 RCNY § 28-02(g)(2), from the holding, sale or disposition, assumption, offset or termination of a position in, property, as defined in 19 RCNY § 28-02(g)(3), 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 19 RCNY § 28-02(g)(1)(v) if, and to the extent that, such activities are not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(g); (11) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, in the case of a taxpayer that is an unincorporated entity eligible for the partial self-trading exemption described in 19 RCNY § 28-02(g)(4), the amount allowed as an exclusion or deduction in determining federal gross income or 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 19 RCNY § 28-02(g); (12) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after July 1, 1994, the amount allowed as an exclusion or deduction in determining federal gross income or 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 19 RCNY § 28-02(h)(2)(ii); and (13) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, the amount allowed as an exclusion or deduction in determining federal gross income or 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 19 RCNY § 28-02(h)(2)(iii).
(c)Modifications reducing federal gross income. (Administrative Code § 11-506(c)). The Federal gross income of the unincorporated business determined under 19 RCNY § 28-05(a) shall be reduced by the following items, to the extent such items are 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 State of New York authorizing the issuance of such obligations or securities, but includible in gross income for Federal income tax purposes; (4) The amount of any refund or credit for overpayment of income taxes imposed by the City or State of New York or any other taxing jurisdiction, to the extent properly included in gross income for Federal income tax purposes. This modification does not apply to interest paid or allowed on any refund or credit for overpayment of income taxes includible in gross income for Federal income tax purposes; (5) With respect to gain derived from the sale or other disposition of any property acquired prior to January 1, 1966, except property described in subsections 1 and 4 of § 1221 of the Internal Revenue Code, the difference between: (i) the amount of gain included in Federal gross income with respect to each such property, and (ii) the amount of gain (if smaller than the amount described in (i)) 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 1, 1966, or the date of its sale or other disposition prior to January 1, 1966, plus or minus all adjustments to basis made with respect to such property for Federal income tax purposes for periods on and after January 1, 1966; provided, however, that the total modification under this paragraph 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 31, 1981, any amount properly includible in federal gross income solely as a result of an election made pursuant to § 168(f)(8) of the Internal Revenue Code as it was in effect for safe harbor lease agreements entered into prior to January 1, 1984, except with respect to property which is a qualified mass commuting vehicle described in § 168(f)(8)(d) of the Internal Revenue Code; (7) Upon the disposition of recovery property to which 19 RCNY § 28-06(n) applies, the amount, if any, by which the aggregate accelerated cost recovery system deduction attributable to such property, described in 19 RCNY § 28-06(m), exceeds the aggregate of the deductions for depreciation attributable to such property allowable pursuant to such 19 RCNY § 28-06(n); (8) For taxable years beginning on or after July 1, 1994, 50 percent of the amount of dividends (to the extent includible in gross income for federal income tax purposes and not subtracted under paragraph (2) or (3) of this subdivision (c)), other than (i) the amounts described in subparagraph 13 or 15 of paragraph (b) of Administrative Code § 11-602(8), and (ii) dividends from stock described in paragraph (b) or (c) of Administrative Code § 11-602(3), provided, however, no portion of a dividend from stock with respect to which a dividend deduction would be disallowed by § 246(c) of the Internal Revenue Code if the unincorporated business were subject to federal income tax as a corporation shall be subtracted under this paragraph (8). For purposes of subparagraphs (i) and (ii) of this paragraph (8), references in Administrative Code § 11-602 to "acquiring person" or "acquiring corporation" are deemed to refer to the unincorporated business; (9) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, 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, income and gains, other than as a dealer, from the holding, sale or disposition, assumption, offset or termination of a position in, property as defined in 19 RCNY § 28-02(g)(3), 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 19 RCNY § 28-02(g)(1)(v) if, and to the extent that, such activities are not deemed an unincorporated business carried on by the taxpayer pursuant to the provisions of 19 RCNY § 28-02(g); (10) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, in the case of a taxpayer that is an unincorporated entity eligible for the partial self-trading exemption described in 19 RCNY § 28-02(g)(4), 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 19 RCNY § 28-02(g); (11) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after July 1, 1994, 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 19 RCNY § 28-02(h)(ii); and (12) Notwithstanding any other provision of these rules to the contrary, for taxable years beginning on or after January 1, 1996, the amount of any income or gain (to the extent includible in gross income for federal income tax purposes) realized by an owner, lessee or fiduciary holding, leasing or managing real property from providing parking, garaging or motor vehicle storage services 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 19 RCNY § 28-02(h)(iii).
(d)For purposes of subdivisions (b)(10) and (c)(9) of this section, ordinary and routine trading or investment activity will include entering into an agreement to participate in a transaction described in subparagraphs (v)(A) through (v)(D) of 19 RCNY § 28-02(g)(1). Consequently, for taxable years beginning on or after January 1, 1996, losses incurred in connection with, or as a result of, entering into such an agreement must be added back to federal gross income in determining unincorporated business gross income, and income and gains realized in connection with, or as a result of, entering into such an agreement, such as commitment fees or breakup fees, must be excluded from federal gross income in determining unincorporated business gross income to the extent that any such transaction is not considered to be pursuant to an unincorporated business carried on by the taxpayer pursuant to 19 RCNY § 28-02(g).
