N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 3-4.4

Current through Register Vol. 46, No. 45, November 2, 2024

Section 3-4.4 - Presumed investment capital that fails the holding period requirement

(Tax Law, section 208(5)(d))

(a) If a corporation disposes of presumed investment capital after the filing of the original report for that tax year the corporation must determine how long such stock had been held for investment. If any such stock in fact had been held as investment for one year or less (as counted across tax years), the corporation must either:

(1) file an amended report for the taxable year in which such stock was presumed investment capital to properly classify the capital and income as business capital and income, respectively; or

(2)

(i) increase its business capital in the immediately succeeding taxable year by the amount previously included in investment capital for that stock, net of any liabilities attributable to that stock (but not less than zero); and

(ii) increase its business income in the immediately succeeding taxable year by the amount of income and net gains (but not less than zero) from that stock previously included in gross investment income after the limitation in section 3-4.5(c) of this Subpart less either

(a) the safe harbor reduction amount determined in section 3-4.8 of this Subpart on the return on which this presumed investment capital was identified or

(b) the amount of interest deductions directly or indirectly attributable to the items of investment capital that failed the presumption determined pursuant to the method in section 3-4.7 of this Subpart on the return on which this presumed investment capital was identified. No adjustment will be allowed in the immediately succeeding taxable year for excess interest deductions directly or indirectly attributable to the items of investment capital that failed the presumption that were added back to ENI in the year the presumed investment capital was included in investment capital.

(b) For purposes of paragraph (2) of subdivision (a) of this section, to determine if stocks that are presumed investment capital generated income that was claimed as investment income in the preceding tax year, the corporation shall use the ordering rules contained in section 3-4.5(b) of this Subpart. Provided that, for purposes of paragraph (3) of such subdivision, stocks that had been held as investment for more than one year, as counted across tax years, shall be considered before stocks that had been held as investment for one year or less. For stocks held for one year or less, stocks with the largest interest deductions computed pursuant to section 3-4.7 of this Subpart shall be considered first.

N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 3-4.4

Adopted New York State Register December 27, 2023/Volume XLV, Issue 52, eff. 12/27/2023