Tax Type
Corporation Income Tax
Description
DISC income; Capital loss income
Topic
Allocation and Apportionment
Date Issued
03-27-1984
March 27, 1984
Re: § 58-1118 Application/Corporate Income Tax
Dear ****
This is in response to your letter of December 15, 1983 and application for correction of the assessments of corporate income tax for the 1978, 1979 and 1980 taxable years. The taxpayer is a multistate corporation with its principal place of business located in New York.
Taxpayer objects to the assessments on several grounds. It first protests the inclusion of DISC income in net income subject to apportionment. The Department's position that § 58-151.083 authorizes the adjustment for DISC income is well established. However, you may preserve your judicial remedies pending final decision in the General Electric case now before the Circuit Court of the City of Richmond in which the § 58-151.083 adjustment is in issue, by filing a protective claim pursuant to § 58-1119.1.
Taxpayer also protests the inclusion in allocable income of a capital loss resulting from the liquidation of a subsidiary. Taxpayer cites § 58-151.039(c) which provides that losses from the disposition of stock or other securities of a subsidiary corporation shall be apportionable. Because the source of the capital loss could not be determined from Taxpayer's 1979 income tax return, the loss was not apportioned. If the taxpayer can substantiate that the capital loss resulted from the disposition of stock or securities of its subsidiary corporation, the assessment will be adjusted.
Finally, Taxpayer protests the disallowance of a deduction for amounts related to the Work Incentive (WIN) Credit. § 58-151.032 sets forth the additions to and subtractions from federal taxable income in determining Virginia taxable income. § 58-151.013, which is cross-referenced in § 58-151.032, was amended for taxable years beginning on and after January 1, 1981 to provide a subtraction for the WIN credit.
However, for taxable years prior to 1981, no such provision was in effect. Thus the disallowance of a deduction or subtraction for the WIN credit for the taxable years in issue was proper.
Accordingly, I hold the assessments to be correct. In regard to the matter of the capital loss, additional information is necessary in order to reduce that assessment.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner